Tegma Gestão Logística S.A. (BVMF:TGMA3) Is About To Go Ex-Dividend, And It Pays A 6.7% Yield

It looks like Tegma Gestão Logística S.A. (BVMF:TGMA3) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves 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 Tegma Gestão Logística's shares on or after the 12th of April, you won't be eligible to receive the dividend, when it is paid on the 23rd of April.

The company's upcoming dividend is R$0.72 a share, following on from the last 12 months, when the company distributed a total of R$1.83 per share to shareholders. Calculating the last year's worth of payments shows that Tegma Gestão Logística has a trailing yield of 6.7% on the current share price of R$27.38. If you buy this business for its dividend, you should have an idea of whether Tegma Gestão Logística's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Tegma Gestão Logística

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Tegma Gestão Logística is paying out an acceptable 65% of its profit, a common payout level among most companies. 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 paid out more than half (65%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Tegma Gestão Logística'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.

Click here to see how much of its profit Tegma Gestão Logística paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Tegma Gestão Logística's earnings per share have been growing at 11% a year for the past five years. Tegma Gestão Logística is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Tegma Gestão Logística has delivered an average of 42% per year annual increase in its dividend, based on the past nine years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Has Tegma Gestão Logística got what it takes to maintain its dividend payments? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that Tegma Gestão Logística is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. All things considered, we are not particularly enthused about Tegma Gestão Logística from a dividend perspective.

While it's tempting to invest in Tegma Gestão Logística for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Tegma Gestão Logística and understanding them should be part of your investment process.

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.