Magyar Bancorp, Inc.( NASDAQ:MGYR ) stock is about to trade ex-dividend in two days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Magyar Bancorp's shares on or after the 12th of February will not receive the dividend, which will be paid on the 26th of February.
The company's next dividend payment will be US$0.10 per share. Last year, in total, the company distributed US$0.36 to shareholders. Based on the last year's worth of payments, Magyar Bancorp has a trailing yield of 2.2% on the current stock price of US$18.40. 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! So we need to investigate whether Magyar Bancorp can afford its dividend, and if the dividend could grow.
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. Magyar Bancorp is paying out just 17% 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.
View our latest analysis for Magyar Bancorp
Click here to see how much of its profit Magyar Bancorp paid out over the last 12 months.
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. That's why it's comforting to see Magyar Bancorp's earnings have been skyrocketing, up 40% per annum for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Magyar Bancorp has delivered 35% dividend growth per year on average over the past four years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
Is Magyar Bancorp worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Magyar Bancorp ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
In light of that, while Magyar Bancorp has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for Magyar Bancorp that we recommend you consider before investing in the business.
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.
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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.
