Why You Might Be Interested In Dimed S.A. Distribuidora de Medicamentos (BVMF:PNVL3) 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 Dimed S.A. Distribuidora de Medicamentos (BVMF:PNVL3) is about to trade ex-dividend in the next three days. 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. Thus, you can purchase Dimed Distribuidora de Medicamentos' shares before the 8th of April in order to receive the dividend, which the company will pay on the 31st of March.

The company's next dividend payment will be R$0.0773869 per share, and in the last 12 months, the company paid a total of R$0.25 per share. Based on the last year's worth of payments, Dimed Distribuidora de Medicamentos stock has a trailing yield of around 2.0% on the current share price of R$12.82. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Dimed Distribuidora de Medicamentos has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Dimed Distribuidora de Medicamentos

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Dimed Distribuidora de Medicamentos paid out a comfortable 40% of its profit last year. A useful secondary check can be to evaluate whether Dimed Distribuidora de Medicamentos generated enough free cash flow to afford its dividend. It paid out 18% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Dimed Distribuidora de Medicamentos'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.

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

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 fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Dimed Distribuidora de Medicamentos, with earnings per share up 2.5% on average over the last five years. Recent growth has not been impressive. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Dimed Distribuidora de Medicamentos has lifted its dividend by approximately 12% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid Dimed Distribuidora de Medicamentos? Earnings per share growth has been growing somewhat, and Dimed Distribuidora de Medicamentos is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Dimed Distribuidora de Medicamentos is halfway there. There's a lot to like about Dimed Distribuidora de Medicamentos, and we would prioritise taking a closer look at it.

Curious what other investors think of Dimed Distribuidora de Medicamentos? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.