There’s A Lot To Like About MGP Ingredients’ (NASDAQ:MGPI) Upcoming US$0.12 Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see MGP Ingredients, Inc. (NASDAQ:MGPI) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before a company’s record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase MGP Ingredients’ shares before the 15th of November to receive the dividend, which will be paid on the 29th of November.
The company’s next dividend payment will be US$0.12 per share, on the back of last year when the company paid a total of US$0.48 to shareholders. Last year’s total dividend payments show that MGP Ingredients has a trailing yield of 0.9% on the current share price of US$50.90. 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! As a result, readers should always check whether MGP Ingredients has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for MGP Ingredients
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. MGP Ingredients is paying out just 10.0% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 25% of its free cash flow as dividends last year, which is conservatively low.
It’s positive to see that MGP Ingredients’s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, MGP Ingredients’s earnings per share have been growing at 17% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination – plus the dividend can always be increased later.
Story Continues
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, MGP Ingredients has lifted its dividend by approximately 25% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Is MGP Ingredients an attractive dividend stock, or better left on the shelf? It’s great that MGP Ingredients is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It’s disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Overall we think this is an attractive combination and worthy of further research.
While it’s tempting to invest in MGP Ingredients for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for MGP Ingredients and you should be aware of this before buying any shares.
Generally, we wouldn’t recommend just buying the first dividend stock you see. Here’s a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
#Lot #MGP #Ingredients #NASDAQMGPI #Upcoming #US0.12 #Dividend