Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Meta Financial Group, Inc. (NASDAQ:CASH) is about to trade ex-dividend in the next four days. If you purchase the stock on or after the 9th of September, you won’t be eligible to receive this dividend, when it is paid on the 1st of October.
Meta Financial Group’s next dividend payment will be US$0.05 per share, on the back of last year when the company paid a total of US$0.20 to shareholders. Based on the last year’s worth of payments, Meta Financial Group stock has a trailing yield of around 1.0% on the current share price of $19.13. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Meta Financial Group has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Meta Financial Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Meta Financial Group is paying out just 6.5% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
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.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It’s encouraging to see Meta Financial Group has grown its earnings rapidly, up 29% a year for the past five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Meta Financial Group has delivered 1.4% dividend growth per year on average over the past 10 years. It’s good to see both earnings and the dividend have improved – although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
Final Takeaway
From a dividend perspective, should investors buy or avoid Meta Financial Group? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly – this can sometimes signal management is focused on the long term future of the business. Overall, Meta Financial Group looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
So while Meta Financial Group looks good from a dividend perspective, it’s always worthwhile being up to date with the risks involved in this stock. For example, we’ve found 2 warning signs for Meta Financial Group (1 shouldn’t be ignored!) that deserve your attention before investing in the shares.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
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