Here's What We Like About Mills Locação Serviços e Logística's (BVMF:MILS3) Upcoming Dividend

Readers hoping to buy Mills Locação, Serviços e Logística S.A. (BVMF:MILS3) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Mills Locação Serviços e Logística's shares before the 2nd of January in order to be eligible for the dividend, which will be paid on the 15th of January.

The company's next dividend payment will be R$0.2287755 per share, and in the last 12 months, the company paid a total of R$0.39 per share. Looking at the last 12 months of distributions, Mills Locação Serviços e Logística has a trailing yield of approximately 4.5% on its current stock price of R$8.61. If you buy this business for its dividend, you should have an idea of whether Mills Locação Serviços e Logística's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Mills Locação Serviços e Logística

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. That's why it's good to see Mills Locação Serviços e Logística paying out a modest 37% of its earnings. A useful secondary check can be to evaluate whether Mills Locação Serviços e Logística generated enough free cash flow to afford its dividend. It paid out an unsustainably high 2,643% of its free cash flow as dividends over the past 12 months, which is worrying. Our definition of free cash flow excludes cash generated from asset sales, so since Mills Locação Serviços e Logística is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.

Mills Locação Serviços e Logística paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Mills Locação Serviços e Logística to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Mills Locação Serviços e Logística's earnings have been skyrocketing, up 56% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Mills Locação Serviços e Logística has delivered 0.6% dividend growth per year on average over the past 10 years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

Is Mills Locação Serviços e Logística an attractive dividend stock, or better left on the shelf? We like that Mills Locação Serviços e Logística has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

In light of that, while Mills Locação Serviços e Logística has an appealing dividend, it's worth knowing the risks involved with this stock. For example, Mills Locação Serviços e Logística has 2 warning signs (and 1 which is concerning) we think you should know about.

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.