Buying MPC Münchmeyer Petersen Capital AG (ETR:MPCK) for its next dividend might not be a good idea

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Some investors rely on dividends to grow their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that MPC Munchmeyer Petersen Capital AG (ETR:MPCK) is set to go ex-dividend in just three days. The ex-dividend date is usually one business day before the record date which is the latest date by which you must be present on the books of the company as a shareholder in order to receive the dividend. The ex-dividend date is important because any stock transaction must have settled before the record date to be eligible for a dividend. Accordingly, MPC Münchmeyer Petersen Capital investors who buy the stock on or after April 28 will not receive the dividend, which will be paid on May 2.

The upcoming dividend for MPC Münchmeyer Petersen Capital is €0.12 per share. Dividends are an important source of income for many shareholders, but the health of the company is essential to sustaining those dividends. That’s why we always have to check if the dividend payouts seem sustainable and if the business is growing.

Check out our latest analysis for MPC Münchmeyer Petersen Capital

Dividends are usually paid out of company earnings, so if a company pays out more than it has earned, its dividend is usually at risk of being reduced. MPC Münchmeyer Petersen Capital paid out more than half (60%) of its profits last year, which is a regular payout ratio for most companies.

When a company has paid out less in dividends than it has earned in profits, this generally suggests that its dividend is affordable. The lower the percentage of its profits it pays out, the greater the margin of safety for the dividend if the company goes into a recession.

Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.

XTRA:MPCK Historic Dividend April 24, 2022

Have earnings and dividends increased?

Companies with declining profits are riskier for dividend shareholders. If business goes into a recession and the dividend is cut, the company could see its value drop precipitously. MPC Münchmeyer Petersen Capital’s earnings per share have fallen by around 12% per year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid out shrinks.

This is the first year that MPC Münchmeyer Petersen Capital has paid out a dividend, so it doesn’t have much history to compare against yet.

The essential

Is MPC Münchmeyer Petersen Capital an attractive dividend stock, or better left on the shelf? Earnings per share are down and the company pays more than half of its profits to shareholders; not a tempting combination. MPC Münchmeyer Petersen Capital doesn’t seem to have much upside, and we’re not willing to take the risk of holding it for the dividend.

So if you are still interested in MPC Münchmeyer Petersen Capital despite its low dividend qualities, you should be well informed about some of the risks this stock faces. Our analysis shows 2 warning signs for MPC Münchmeyer Petersen Capital and you should be aware of this before buying stocks.

As a general rule, we don’t recommend simply buying the first dividend-paying stock you see. Here is a curated list of attractive stocks that are strong dividend payers.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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