Be Sure To Check Out M. Dias Branco S.A. Indústria e Comércio de Alimentos (BVMF:MDIA3) Before It Goes Ex-Dividend

Readers hoping to buy M. Dias Branco S.A. Indústria e Comércio de Alimentos (BVMF:MDIA3) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase M. Dias Branco Indústria e Comércio de Alimentos' shares before the 17th of June in order to be eligible for the dividend, which will be paid on the 28th of June.

The company's next dividend payment will be R$0.051 per share, and in the last 12 months, the company paid a total of R$0.63 per share. Looking at the last 12 months of distributions, M. Dias Branco Indústria e Comércio de Alimentos has a trailing yield of approximately 2.0% on its current stock price of R$31.84. 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 M. Dias Branco Indústria e Comércio de Alimentos has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for M. Dias Branco Indústria e Comércio de Alimentos

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. M. Dias Branco Indústria e Comércio de Alimentos is paying out just 20% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 4.1% of its cash flow last year.

It's positive to see that M. Dias Branco Indústria e Comércio de Alimentos'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 M. Dias Branco Indústria e Comércio de Alimentos, with earnings per share up 6.3% on average over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. This is an attractive combination, because when profits are reinvested effectively, growth can compound, with corresponding benefits for earnings and dividends in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, M. Dias Branco Indústria e Comércio de Alimentos has increased its dividend at approximately 6.2% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Has M. Dias Branco Indústria e Comércio de Alimentos got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and M. Dias Branco Indústria e Comércio de Alimentos is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but M. Dias Branco Indústria e Comércio de Alimentos is being conservative with its dividend payouts and could still perform reasonably over the long run. M. Dias Branco Indústria e Comércio de Alimentos looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Curious what other investors think of M. Dias Branco Indústria e Comércio de Alimentos? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

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.