Is It Smart To Buy Banco Bilbao Vizcaya Argentaria, S.A. (BME:BBVA) Before It Goes Ex-Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Banco Bilbao Vizcaya Argentaria, S.A. (BME:BBVA) is about to trade ex-dividend in the next three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. In other words, investors can purchase Banco Bilbao Vizcaya Argentaria's shares before the 13th of October in order to be eligible for the dividend, which will be paid on the 15th of October.

The company's next dividend payment will be €0.2997 per share. Last year, in total, the company distributed €0.92 to shareholders. Based on the last year's worth of payments, Banco Bilbao Vizcaya Argentaria has a trailing yield of 4.0% on the current stock price of €23.02. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Banco Bilbao Vizcaya Argentaria can afford its dividend, and if the dividend could grow.

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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. Banco Bilbao Vizcaya Argentaria paid out a comfortable 32% of its profit last year.

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.

Check out our latest analysis for Banco Bilbao Vizcaya Argentaria

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. 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 Banco Bilbao Vizcaya Argentaria's earnings have been skyrocketing, up 43% 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. Since the start of our data, 10 years ago, Banco Bilbao Vizcaya Argentaria has lifted its dividend by approximately 19% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is Banco Bilbao Vizcaya Argentaria an attractive dividend stock, or better left on the shelf? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the 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. Banco Bilbao Vizcaya Argentaria 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 Banco Bilbao Vizcaya Argentaria has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 1 warning sign for Banco Bilbao Vizcaya Argentaria you should know about.

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.