Two Days Left Until Iochpe-Maxion S.A. (BVMF:MYPK3) Trades Ex-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 Iochpe-Maxion S.A. (BVMF:MYPK3) is about to go ex-dividend in just two 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Iochpe-Maxion's shares before the 6th of October in order to receive the dividend, which the company will pay on the 1st of January.

The company's next dividend payment will be R$0.3071381 per share. Last year, in total, the company distributed R$0.71 to shareholders. Looking at the last 12 months of distributions, Iochpe-Maxion has a trailing yield of approximately 6.2% on its current stock price of R$11.49. If you buy this business for its dividend, you should have an idea of whether Iochpe-Maxion's dividend is reliable and sustainable. So we need to investigate whether Iochpe-Maxion can afford its dividend, and if the dividend could grow.

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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. Iochpe-Maxion paid out a comfortable 39% of its profit last year. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 14% of its cash flow last year.

It's positive to see that Iochpe-Maxion'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.

Check out our latest analysis for Iochpe-Maxion

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's not ideal to see Iochpe-Maxion's earnings per share have been shrinking at 3.8% 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. In the last 10 years, Iochpe-Maxion has lifted its dividend by approximately 9.4% a year on average.

The Bottom Line

Should investors buy Iochpe-Maxion for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

While it's tempting to invest in Iochpe-Maxion for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for Iochpe-Maxion (1 doesn't sit too well with us!) that you ought to be aware of before buying the shares.

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.