Is It Smart To Buy Camil Alimentos S.A. (BVMF:CAML3) Before It Goes Ex-Dividend?

Camil Alimentos S.A. (BVMF:CAML3) stock is about to trade ex-dividend in three days. You will need to purchase shares before the 30th of December to receive the dividend, which will be paid on the 12th of January.

Camil Alimentos's next dividend payment will be R$0.054 per share, on the back of last year when the company paid a total of R$0.16 to shareholders. Looking at the last 12 months of distributions, Camil Alimentos has a trailing yield of approximately 1.4% on its current stock price of R$11.38. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Camil Alimentos

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. Camil Alimentos paid out just 15% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. Luckily it paid out just 1.4% of its free cash flow last year.

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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. 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 comforting to see Camil Alimentos's earnings have been skyrocketing, up 28% per annum for the past five years. Camil Alimentos earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Camil Alimentos's dividend payments are broadly unchanged compared to where they were three years ago.

Final Takeaway

From a dividend perspective, should investors buy or avoid Camil Alimentos? It's great that Camil Alimentos is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Camil Alimentos for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for Camil Alimentos (1 is concerning!) that deserve your attention before investing in the shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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