Stock Analysis

Should Income Investors Look At Qualicorp Consultoria e Corretora de Seguros S.A. (BVMF:QUAL3) Before Its Ex-Dividend?

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BOVESPA:QUAL3
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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 Qualicorp Consultoria e Corretora de Seguros S.A. (BVMF:QUAL3) is about to go ex-dividend in just four 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Qualicorp Consultoria e Corretora de Seguros' shares before the 15th of May to receive the dividend, which will be paid on the 31st of December.

The company's upcoming dividend is R$0.079 a share, following on from the last 12 months, when the company distributed a total of R$0.32 per share to shareholders. Calculating the last year's worth of payments shows that Qualicorp Consultoria e Corretora de Seguros has a trailing yield of 7.3% on the current share price of R$4.34. If you buy this business for its dividend, you should have an idea of whether Qualicorp Consultoria e Corretora de Seguros's dividend is reliable and sustainable. As a result, readers should always check whether Qualicorp Consultoria e Corretora de Seguros has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Qualicorp Consultoria e Corretora de Seguros

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. Fortunately Qualicorp Consultoria e Corretora de Seguros's payout ratio is modest, at just 32% of profit. 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. Dividends consumed 54% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Qualicorp Consultoria e Corretora de Seguros'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.

historic-dividend
BOVESPA:QUAL3 Historic Dividend May 10th 2023

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Qualicorp Consultoria e Corretora de Seguros's earnings per share have dropped 24% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Qualicorp Consultoria e Corretora de Seguros has seen its dividend decline 3.6% per annum on average over the past eight years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

The Bottom Line

Is Qualicorp Consultoria e Corretora de Seguros worth buying for its dividend? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. All things considered, we are not particularly enthused about Qualicorp Consultoria e Corretora de Seguros from a dividend perspective.

However if you're still interested in Qualicorp Consultoria e Corretora de Seguros as a potential investment, you should definitely consider some of the risks involved with Qualicorp Consultoria e Corretora de Seguros. Be aware that Qualicorp Consultoria e Corretora de Seguros is showing 3 warning signs in our investment analysis, and 1 of those is concerning...

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Find out whether Qualicorp Consultoria e Corretora de Seguros is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.