Suzano S.A. (BVMF:SUZB3) Passed Our Checks, And It's About To Pay A R$1.1165872 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Suzano S.A. (BVMF:SUZB3) is about to go ex-dividend in just 3 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order 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. Accordingly, Suzano investors that purchase the stock on or after the 19th of December will not receive the dividend, which will be paid on the 4th of February.

The company's next dividend payment will be R$1.1165872 per share. Last year, in total, the company distributed R$1.17 to shareholders. Looking at the last 12 months of distributions, Suzano has a trailing yield of approximately 2.4% on its current stock price of R$49.06. 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 Suzano can afford its dividend, and if the dividend could grow.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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. Suzano paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 33% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Suzano's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

See our latest analysis for Suzano

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. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Suzano earnings per share are up 5.4% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Suzano has delivered 15% dividend growth per year on average over the past eight years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Should investors buy Suzano for the upcoming dividend? Earnings per share have been growing moderately, and Suzano is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Suzano is halfway there. Suzano looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Suzano looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Suzano has 2 warning signs we think you should be aware of.

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.