Don't Buy Quálitas Controladora, S.A.B. de C.V. (BMV:Q) For Its Next Dividend Without Doing These Checks

It looks like Quálitas Controladora, S.A.B. de C.V. (BMV:Q) is about to go ex-dividend in the next 4 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Quálitas Controladora. de's shares on or after the 4th of November, you won't be eligible to receive the dividend, when it is paid on the 5th of November.

The company's next dividend payment will be Mex$4.50 per share, on the back of last year when the company paid a total of Mex$9.00 to shareholders. Based on the last year's worth of payments, Quálitas Controladora. de has a trailing yield of 4.7% on the current stock price of Mex$193.19. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Its dividend payout ratio is 79% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

See our latest analysis for Quálitas Controladora. de

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. 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 not ideal to see Quálitas Controladora. de's earnings per share have been shrinking at 2.5% a year over the previous five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Quálitas Controladora. de has lifted its dividend by approximately 34% a year on average. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. Quálitas Controladora. de is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.

The Bottom Line

Has Quálitas Controladora. de got what it takes to maintain its dividend payments? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. Quálitas Controladora. de doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

Although, if you're still interested in Quálitas Controladora. de and want to know more, you'll find it very useful to know what risks this stock faces. Case in point: We've spotted 2 warning signs for Quálitas Controladora. de you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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