Should Income Investors Look At JBS S.A. (BVMF:JBSS3) Before Its Ex-Dividend?

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that JBS S.A. (BVMF:JBSS3) is about to go ex-dividend in just four days. The ex-dividend date is usually set to be two business days 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. 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. Thus, you can purchase JBS' shares before the 30th of April in order to receive the dividend, which the company will pay on the 1st of January.

The company's upcoming dividend is R$2.00 a share, following on from the last 12 months, when the company distributed a total of R$3.00 per share to shareholders. Based on the last year's worth of payments, JBS has a trailing yield of 6.4% on the current stock price of R$46.72. If you buy this business for its dividend, you should have an idea of whether JBS'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.

We've discovered 3 warning signs about JBS. View them for free.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year JBS paid out 91% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. A useful secondary check can be to evaluate whether JBS generated enough free cash flow to afford its dividend. Fortunately, it paid out only 29% of its free cash flow in the past year.

It's good to see that while JBS's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.

View our latest analysis for JBS

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. For this reason, we're glad to see JBS's earnings per share have risen 14% per annum over the last five years.

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, nine years ago, JBS has lifted its dividend by approximately 25% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

From a dividend perspective, should investors buy or avoid JBS? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why JBS is paying out so much of its profit. In summary, it's hard to get excited about JBS from a dividend perspective.

In light of that, while JBS has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 3 warning signs for JBS (1 is a bit concerning!) that you ought to be aware of before buying the shares.

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.