Yahoo Finance M.D.C. Holdings, Inc. (NYSE:MDC) Stock Goes Ex-Dividend In Just 3 Days
M.D.C. Holdings, Inc. (NYSE:MDC) is about to trade ex-dividend in the next 3 days. Investors can purchase shares before the 11th of February in order to be eligible for this dividend, which will be paid on the 26th of February.
M.D.C. Holdings's next dividend payment will be US$0.33 per share, and in the last 12 months, the company paid a total of US$1.32 per share. Calculating the last year's worth of payments shows that M.D.C. Holdings has a trailing yield of 3.0% on the current share price of $44.5. 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 check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for M.D.C. Holdings
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. M.D.C. Holdings paid out a comfortable 32% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out an unsustainably high 221% of its free cash flow as dividends over the past 12 months, which is worrying. Our definition of free cash flow excludes cash generated from asset sales, so since M.D.C. Holdings is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.
M.D.C. Holdings paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to M.D.C. Holdings's ability to maintain its dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see M.D.C. Holdings's earnings have been skyrocketing, up 29% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, ten years ago, M.D.C. Holdings has lifted its dividend by approximately 4.9% a year on average. Earnings per share have been growing much quicker than dividends, potentially because M.D.C. Holdings is keeping back more of its profits to grow the business.
To Sum It Up
Is M.D.C. Holdings an attractive dividend stock, or better left on the shelf? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. In summary, while it has some positive characteristics, we're not inclined to race out and buy M.D.C. Holdings today.
Curious what other investors think of M.D.C. Holdings? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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