Why It Might Not Make Sense To Buy Wiz Co Participações e Corretagem de Seguros S.A. (BVMF:WIZC3) For Its Upcoming Dividend

Wiz Co Participações e Corretagem de Seguros S.A. (BVMF:WIZC3) is about to trade ex-dividend in the next 2 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Wiz Co Participações e Corretagem de Seguros' shares before the 2nd of May in order to receive the dividend, which the company will pay on the 12th of December.

The company's upcoming dividend is R$0.45 a share, following on from the last 12 months, when the company distributed a total of R$0.45 per share to shareholders. Calculating the last year's worth of payments shows that Wiz Co Participações e Corretagem de Seguros has a trailing yield of 7.5% on the current share price of R$5.91. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Wiz Co Participações e Corretagem de Seguros

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Wiz Co Participações e Corretagem de Seguros paid out more than half (53%) of its earnings last year, which is a regular payout ratio for most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that Wiz Co Participações e Corretagem de Seguros's earnings are down 3.3% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Wiz Co Participações e Corretagem de Seguros has seen its dividend decline 20% per annum on average over the past four 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

Should investors buy Wiz Co Participações e Corretagem de Seguros for the upcoming dividend? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

With that in mind though, if the poor dividend characteristics of Wiz Co Participações e Corretagem de Seguros don't faze you, it's worth being mindful of the risks involved with this business. In terms of investment risks, we've identified 2 warning signs with Wiz Co Participações e Corretagem de Seguros and understanding them should be part of your investment process.

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.