Four Days Left To Buy Medallion Financial Corp. (NASDAQ:MFIN) Before The Ex-Dividend Date
It looks like Medallion Financial Corp. (NASDAQ:MFIN) is about to go ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. Therefore, if you purchase Medallion Financial's shares on or after the 9th of November, you won't be eligible to receive the dividend, when it is paid on the 19th of November.
The company's next dividend payment will be US$0.14 per share. Last year, in total, the company distributed US$0.56 to shareholders. Based on the last year's worth of payments, Medallion Financial stock has a trailing yield of around 5.6% on the current share price of US$9.99. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Medallion Financial paying out a modest 44% of its earnings.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
View our latest analysis for Medallion Financial
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Readers will understand then, why we're concerned to see Medallion Financial's earnings per share have dropped 7.6% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Medallion Financial has seen its dividend decline 5.6% per annum on average over the past 10 years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
To Sum It Up
Should investors buy Medallion Financial for the upcoming dividend? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. We're unconvinced on the company's merits, and think there might be better opportunities out there.
However if you're still interested in Medallion Financial as a potential investment, you should definitely consider some of the risks involved with Medallion Financial. For instance, we've identified 4 warning signs for Medallion Financial (2 make us uncomfortable) you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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