Yduqs Participações SA (BVMF:YDUQ3) The stock is set to trade ex-dividend in three days. The ex-dividend date is one business day before a company’s record date, which is the date the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to know because any purchase of shares made on or after this date may mean late settlement which does not appear on the record date. Therefore, if you buy Yduqs Participações shares on or after April 29, you will not be eligible to receive the dividend when it is paid on January 1.
The company’s next dividend payment will be R$0.12 per share, and over the past 12 months the company has paid a total of R$0.12 per share. Calculating the value of last year’s payments shows that Yduqs Participações has a return of 0.8% on the current share price of R$16.29. We love to see companies pay out a dividend, but it’s also important to make sure that laying the golden eggs doesn’t kill our golden hen! We therefore need to check whether dividend payments are covered and whether profits are increasing.
See our latest review for Yduqs Participações
If a company pays out more dividends than it has earned, the dividend may become unsustainable – a less than ideal situation. Yduqs Participações only pays out 24% of its profit after tax, which is comfortably low and leaves plenty of room for maneuver in the event of adverse events. That said, even very profitable companies can sometimes not generate enough cash to pay the dividend, so we should always check if the dividend is covered by cash flow. It paid out 86% of its free cash flow as dividends, which is within typical limits but will limit the company’s ability to increase the dividend if there is no growth.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This generally suggests that the dividend is sustainable, as long as earnings don’t drop precipitously.
Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have earnings and dividends increased?
When earnings decline, dividend companies become much more difficult to analyze and to own safely. If earnings fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. Readers will then understand why we are concerned that earnings per share of Yduqs Participações have fallen by 15% per year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid out shrinks.
Another key way to gauge a company’s dividend outlook is to measure its historical rate of dividend growth. Yduqs Participações has recorded dividend growth of 6.3% per year on average over the past 10 years.
Should investors buy Yduqs Participações for the next dividend? Earnings per share have fallen significantly, although at least Yduqs Participações has paid out less than half of its earnings and free cash flow over the past year, leaving some leeway. Overall, we’re not extremely bearish on the stock, but there are probably better dividend investments out there.
While you aren’t too concerned about Yduqs Participações’ ability to pay dividends, you should still keep in mind some of the other risks this company faces. We have identified 3 warning signs with Yduqs Participações (at least 1 which doesn’t suit us too much), and understanding them should be part of your investment process.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.