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It looks like Microequities Asset Management Group Limited (ASX:MAM) is about to go ex-dividend in the next 2 days. Ex-dividend means that investors that purchase the stock on or after the 20th of August will not receive this dividend, which will be paid on the 4th of September.
Microequities Asset Management Group's next dividend payment will be AU$0.01 per share, and in the last 12 months, the company paid a total of AU$0.02 per share. Last year's total dividend payments show that Microequities Asset Management Group has a trailing yield of 5.7% on the current share price of A$0.35. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Microequities Asset Management Group can afford its dividend, and if the dividend could grow.
See our latest analysis for Microequities Asset Management Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Microequities Asset Management Group's 29% per annum decline in earnings in the past three years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Microequities Asset Management Group's dividend payments are broadly unchanged compared to where they were two years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.
The Bottom Line
From a dividend perspective, should investors buy or avoid Microequities Asset Management Group? 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. It doesn't appear an outstanding opportunity, but could be worth a closer look.