M. Dias Branco S.A. Indústria e Comércio de Alimentos (BVMF:MDIA3) Pays A R$0.03 Dividend In Just Four Days
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 M. Dias Branco S.A. Indústria e Comércio de Alimentos (BVMF:MDIA3) is about to go ex-dividend in just 4 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase M. Dias Branco Indústria e Comércio de Alimentos' shares on or after the 23rd of October will not receive the dividend, which will be paid on the 30th of October.
The company's next dividend payment will be R$0.03 per share. Last year, in total, the company distributed R$0.36 to shareholders. Last year's total dividend payments show that M. Dias Branco Indústria e Comércio de Alimentos has a trailing yield of 1.8% on the current share price of R$19.90. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether M. Dias Branco Indústria e Comércio de Alimentos has been able to grow its dividends, or if the dividend might be cut.
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. M. Dias Branco Indústria e Comércio de Alimentos is paying out just 17% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 40% of its free cash flow in the past year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
View our latest analysis for M. Dias Branco Indústria e Comércio de Alimentos
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see M. Dias Branco Indústria e Comércio de Alimentos's earnings per share have been shrinking at 3.0% 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. M. Dias Branco Indústria e Comércio de Alimentos has delivered an average of 0.8% per year annual increase in its dividend, based on the past 10 years of dividend payments.
The Bottom Line
Is M. Dias Branco Indústria e Comércio de Alimentos an attractive dividend stock, or better left on the shelf? M. Dias Branco Indústria e Comércio de Alimentos has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of M. Dias Branco Indústria e Comércio de Alimentos's dividend merits.
Curious what other investors think of M. Dias Branco Indústria e Comércio de Alimentos? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
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.