Income Investors Should Know That Odontoprev S.A. (BVMF:ODPV3) Goes Ex-Dividend Soon

It looks like Odontoprev S.A. (BVMF:ODPV3) is about to go ex-dividend in the next 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Odontoprev investors that purchase the stock on or after the 24th of April will not receive the dividend, which will be paid on the 12th of July.

The company's next dividend payment will be R$0.22 per share. Last year, in total, the company distributed R$0.45 to shareholders. Calculating the last year's worth of payments shows that Odontoprev has a trailing yield of 4.3% on the current share price of R$10.43. If you buy this business for its dividend, you should have an idea of whether Odontoprev's dividend is reliable and sustainable. So we need to investigate whether Odontoprev can afford its dividend, and if the dividend could grow.

See our latest analysis for Odontoprev

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Odontoprev paid out 55% of its earnings to investors last year, a normal payout level for most businesses. 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 16% 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?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Odontoprev's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Odontoprev has lifted its dividend by approximately 5.1% a year on average.

Final Takeaway

Has Odontoprev got what it takes to maintain its dividend payments? We're not enthused by the flat earnings per share, although at least the company's payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

So if you want to do more digging on Odontoprev, you'll find it worthwhile knowing the risks that this stock faces. Case in point: We've spotted 1 warning sign for Odontoprev you should be aware of.

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.