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

M. Dias Branco S.A. Indústria e Comércio de Alimentos (BVMF:MDIA3) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. This means that investors who purchase M. Dias Branco Indústria e Comércio de Alimentos' shares on or after the 17th of September will not receive the dividend, which will be paid on the 30th of September.

The company's upcoming dividend is R$0.051 a share, following on from the last 12 months, when the company distributed a total of R$0.63 per share to shareholders. Looking at the last 12 months of distributions, M. Dias Branco Indústria e Comércio de Alimentos has a trailing yield of approximately 2.3% on its current stock price of R$27.75. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. 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.

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

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. M. Dias Branco Indústria e Comércio de Alimentos is paying out just 23% 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. The good news is it paid out just 13% of its free cash flow in the 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. 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 5.7% on average over the last five years. Earnings per share have been increasing steadily and management is reinvesting almost all of the profits back into 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. M. Dias Branco Indústria e Comércio de Alimentos has delivered an average of 6.2% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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.

The Bottom Line

From a dividend perspective, should investors buy or avoid M. Dias Branco Indústria e Comércio de Alimentos? Earnings per share growth has been growing somewhat, and M. Dias Branco Indústria e Comércio de Alimentos 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. 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.

Wondering what the future holds for M. Dias Branco Indústria e Comércio de Alimentos? See what the six analysts we track 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.