Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Medibank Private Limited (ASX:MPL) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Medibank Private's shares before the 29th of February to receive the dividend, which will be paid on the 20th of March.

The company's next dividend payment will be AU$0.072 per share, and in the last 12 months, the company paid a total of AU$0.15 per share. Based on the last year's worth of payments, Medibank Private stock has a trailing yield of around 4.0% on the current share price of AU$3.63. 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 Medibank Private can afford its dividend, and if the dividend could grow.

View our latest analysis for Medibank Private

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Medibank Private paid out more than half (62%) of its earnings last year, which is a regular payout ratio for most companies.

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

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Medibank Private's earnings per share have risen 10% per annum over the last five years.



Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last nine years, Medibank Private has lifted its dividend by approximately 12% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is Medibank Private worth buying for its dividend? Medibank Private has an acceptable payout ratio and its earnings per share have been improving at a decent rate. Overall, Medibank Private looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. We've identified 2 warning signs with Medibank Private (at least 1 which is significant), and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.