Why You Might Be Interested In Cambuci S.A. (BVMF:CAMB3) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Cambuci S.A. (BVMF:CAMB3) is about to trade ex-dividend in the next 2 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Cambuci's shares on or after the 3rd of April, you won't be eligible to receive the dividend, when it is paid on the 17th of April.

The company's next dividend payment will be R$0.0202698 per share, and in the last 12 months, the company paid a total of R$0.32 per share. Based on the last year's worth of payments, Cambuci stock has a trailing yield of around 2.9% on the current share price of R$11.27. 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 Cambuci has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Cambuci

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. Cambuci has a low and conservative payout ratio of just 17% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 9.9% of its free cash flow as dividends last year, which is conservatively low.

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 Cambuci paid out over the last 12 months.

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 Cambuci's earnings have been skyrocketing, up 32% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Cambuci looks like a promising growth company.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past two years, Cambuci has increased its dividend at approximately 49% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Should investors buy Cambuci for the upcoming dividend? Cambuci has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.

So while Cambuci looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 2 warning signs for Cambuci that you should be aware of before investing in their shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.