Income Investors Should Know That McAfee Corp. (NASDAQ:MCFE) Goes Ex-Dividend Soon
McAfee Corp. (NASDAQ:MCFE) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase McAfee's shares before the 24th of June to receive the dividend, which will be paid on the 9th of July.
The company's next dividend payment will be US$0.12 per share. Last year, in total, the company distributed US$0.46 to shareholders. Based on the last year's worth of payments, McAfee stock has a trailing yield of around 1.6% on the current share price of $28.18. If you buy this business for its dividend, you should have an idea of whether McAfee's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for McAfee
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. McAfee paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Fortunately, it paid out only 39% of its free cash flow in the past year.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. McAfee reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
Given that McAfee has only been paying a dividend for a year, there's not much of a past history to draw insight from.
We update our analysis on McAfee every 24 hours, so you can always get the latest insights on its financial health, here.
Final Takeaway
Is McAfee worth buying for its dividend? It's hard to get used to McAfee paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. All things considered, we are not particularly enthused about McAfee from a dividend perspective.
While it's tempting to invest in McAfee for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for McAfee (1 doesn't sit too well with us!) that deserve your attention before investing in the shares.
If you're in the market for dividend stocks, we recommend checking our list of top 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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