It Might Not Be A Great Idea To Buy Cury Construtora e Incorporadora S.A. (BVMF:CURY3) For Its Next Dividend

Cury Construtora e Incorporadora S.A. (BVMF:CURY3) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible 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 Cury Construtora e Incorporadora's shares before the 18th of April 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$0.2662055 per share. Last year, in total, the company distributed R$2.19 to shareholders. Calculating the last year's worth of payments shows that Cury Construtora e Incorporadora has a trailing yield of 8.4% on the current share price of R$25.93. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Cury Construtora e Incorporadora has been able to grow its dividends, or if the dividend might be cut.

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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. Cury Construtora e Incorporadora paid out 72% of its earnings to investors last year, a normal payout level for most businesses. 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. The company paid out 109% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

Cury Construtora e Incorporadora paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Cury Construtora e Incorporadora's ability to maintain its dividend.

Check out our latest analysis for Cury Construtora e Incorporadora

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

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about Cury Construtora e Incorporadora's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past four years, Cury Construtora e Incorporadora has increased its dividend at approximately 53% a year on average.

To Sum It Up

Should investors buy Cury Construtora e Incorporadora for the upcoming dividend? It's not great to see earnings per share have been flat and that the company paid out an uncomfortably high percentage of its cash flow over the past year. Cash flows are typically more volatile than earnings, but this is still not what we like to see. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

With that in mind though, if the poor dividend characteristics of Cury Construtora e Incorporadora don't faze you, it's worth being mindful of the risks involved with this business. Case in point: We've spotted 1 warning sign for Cury Construtora e Incorporadora you should be aware of.

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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.