Be Sure To Check Out MGIC Investment Corporation (NYSE:MTG) Before It Goes Ex-Dividend

Simply Wall St
·3 min read

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see MGIC Investment Corporation (NYSE:MTG) is about to trade ex-dividend in the next four days. Ex-dividend means that investors that purchase the stock on or after the 10th of August will not receive this dividend, which will be paid on the 28th of August.

MGIC Investment's next dividend payment will be US$0.06 per share, and in the last 12 months, the company paid a total of US$0.24 per share. Based on the last year's worth of payments, MGIC Investment stock has a trailing yield of around 2.9% on the current share price of $8.28. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether MGIC Investment has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for MGIC Investment

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. MGIC Investment has a low and conservative payout ratio of just 9.4% of its income after tax.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

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. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see MGIC Investment's earnings have been skyrocketing, up 21% per annum for the past five years.

Unfortunately MGIC Investment has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

To Sum It Up

From a dividend perspective, should investors buy or avoid MGIC Investment? Companies like MGIC Investment that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, MGIC Investment appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

While it's tempting to invest in MGIC Investment for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with MGIC Investment and understanding them should be part of your investment process.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

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