CSU Cardsystem S.A. (BVMF:CARD3) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

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 CSU Cardsystem S.A. (BVMF:CARD3) is about to go ex-dividend in just couple of days. You will need to purchase shares before the 29th of June to receive the dividend, which will be paid on the 31st of March.

CSU Cardsystem's next dividend payment will be R$0.064 per share, on the back of last year when the company paid a total of R$0.26 to shareholders. Based on the last year's worth of payments, CSU Cardsystem has a trailing yield of 1.9% on the current stock price of R$13.55. 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 CSU Cardsystem has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for CSU Cardsystem

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. CSU Cardsystem paid out a comfortable 33% of its profit last year. 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. Luckily it paid out just 24% of its free cash flow last 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.

Click here to see how much of its profit CSU Cardsystem paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see CSU Cardsystem has grown its earnings rapidly, up 23% a year for the past five years. CSU Cardsystem is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past ten years, CSU Cardsystem has increased its dividend at approximately 16% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Is CSU Cardsystem worth buying for its dividend? It's great that CSU Cardsystem is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about CSU Cardsystem, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks CSU Cardsystem is facing. Our analysis shows 2 warning signs for CSU Cardsystem and you should be aware of these before buying any shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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