Caixa Seguridade Participações S.A. (BVMF:CXSE3) Is About To Go Ex-Dividend, And It Pays A 5.6% Yield

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Caixa Seguridade Participações S.A. (BVMF:CXSE3) is about to trade ex-dividend in the next four days. The ex-dividend date is commonly two business days 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. This means that investors who purchase Caixa Seguridade Participações' shares on or after the 2nd of May will not receive the dividend, which will be paid on the 15th of May.

The company's upcoming dividend is R$0.32 a share, following on from the last 12 months, when the company distributed a total of R$0.94 per share to shareholders. Last year's total dividend payments show that Caixa Seguridade Participações has a trailing yield of 5.6% on the current share price of R$16.63. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Caixa Seguridade Participações paid out 118% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance.

When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.

Check out our latest analysis for Caixa Seguridade Participações

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. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Caixa Seguridade Participações's earnings per share have been growing at 20% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past three years, Caixa Seguridade Participações has increased its dividend at approximately 24% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Should investors buy Caixa Seguridade Participações for the upcoming dividend? Caixa Seguridade Participações has been generating credible earnings per share growth, although its dividend payments were not adequately covered by earnings. We think there are likely better opportunities out there.

However if you're still interested in Caixa Seguridade Participações as a potential investment, you should definitely consider some of the risks involved with Caixa Seguridade Participações. For example - Caixa Seguridade Participações has 1 warning sign we think 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.