Three Days Left To Buy Fleury S.A. (BVMF:FLRY3) Before The Ex-Dividend Date

Fleury S.A. (BVMF:FLRY3) stock is about to trade ex-dividend in 3 days. Ex-dividend means that investors that purchase the stock on or after the 7th of January will not receive this dividend, which will be paid on the 5th of March.

Fleury's next dividend payment will be R$0.23 per share, on the back of last year when the company paid a total of R$0.93 to shareholders. Based on the last year's worth of payments, Fleury stock has a trailing yield of around 3.5% on the current share price of R$27.02. 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! So we need to investigate whether Fleury can afford its dividend, and if the dividend could grow.

See our latest analysis for Fleury

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. Fleury distributed an unsustainably high 115% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. A useful secondary check can be to evaluate whether Fleury generated enough free cash flow to afford its dividend. The good news is it paid out just 22% of its free cash flow in the last year.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Fleury fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Fleury's earnings per share have risen 15% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Fleury has delivered 15% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Is Fleury worth buying for its dividend? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Fleury is paying out so much of its profit. All things considered, we are not particularly enthused about Fleury from a dividend perspective.

On that note, you'll want to research what risks Fleury is facing. For example, we've found 3 warning signs for Fleury (1 is a bit unpleasant!) that deserve your attention before investing in the shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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