Looks like Masco Company (NYSE:MAS) is set to go ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day shareholders must be on the books of the company to receive a dividend. The ex-dividend date is important because each time a stock is bought or sold, the transaction takes at least two business days to settle. In other words, investors can buy Masco shares before February 24 in order to be eligible for the dividend, which will be paid on March 14.
The company’s next dividend payment will be $0.28 per share, and over the past 12 months the company has paid a total of $1.12 per share. Calculating the value of last year’s payouts shows Masco has a 1.9% return on the current stock price of $57.56. We love to see companies pay out a dividend, but it’s also important to make sure that laying the golden eggs doesn’t kill our golden hen! So we need to consider whether Masco can afford its dividend and whether the dividend could increase.
Check out our latest analysis for Masco
If a company pays out more dividends than it has earned, the dividend may become unsustainable – a less than ideal situation. Masco pays out an acceptable 60% of its profits, a common payout level for most companies. A useful secondary check may be to assess whether Masco has generated enough free cash flow to pay its dividend. Fortunately, it only paid out 26% of its free cash flow over the past year.
It’s positive to see that Masco’s dividend is covered by both earnings and cash flow, as that’s usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a higher payout margin. safety before the dividend is reduced.
Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have earnings and dividends increased?
Companies with consistently rising earnings per share tend to create the best dividend-paying stocks because they generally find it easier to increase dividends per share. If earnings fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. With that in mind, we are encouraged by Masco’s steady growth, with earnings per share up 2.5% on average over the past five years. Earnings per share growth has been weak and the company is already paying out the majority of its profits. Although it is possible to both increase the payout ratio and reinvest in the business, generally the higher the payout ratio, the lower the prospects for future growth of a business.
Many investors will gauge a company’s dividend yield by evaluating how much dividend payouts have changed over time. Masco has recorded dividend growth of 14% per year on average over the past 10 years. We are pleased to see dividends increasing alongside earnings over several years, which may be a sign that the company intends to share the growth with shareholders.
Does Masco have what it takes to maintain its dividend payouts? Earnings per share growth was modest and Masco paid out more than half of its earnings and less than half of its free cash flow, although both payout ratios were within normal limits. It might be worth investigating whether the company is reinvesting in growth projects that could boost earnings and dividends in the future, but so far we’re not so optimistic about its dividend outlook.
In light of this, although Masco has an attractive dividend, it is worth knowing the risks associated with this stock. To help you, we found 2 warning signs for Masco which you should be aware of before investing in their 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.
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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.