Irani Papel e Embalagem S.A. (BVMF:RANI3) Passed Our Checks, And It's About To Pay A R$0.320637 Dividend

Irani Papel e Embalagem S.A. (BVMF:RANI3) stock is about to trade ex-dividend in 4 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Therefore, if you purchase Irani Papel e Embalagem's shares on or after the 24th of April, you won't be eligible to receive the dividend, when it is paid on the 30th of May.

The company's next dividend payment will be R$0.320637 per share, and in the last 12 months, the company paid a total of R$0.63 per share. Calculating the last year's worth of payments shows that Irani Papel e Embalagem has a trailing yield of 8.7% on the current share price of R$7.17. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Irani Papel e Embalagem paid out a comfortable 49% of its profit last year. A useful secondary check can be to evaluate whether Irani Papel e Embalagem generated enough free cash flow to afford its dividend. It paid out 76% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's positive to see that Irani Papel e Embalagem'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.

See our latest analysis for Irani Papel e Embalagem

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. 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 encouraging to see Irani Papel e Embalagem has grown its earnings rapidly, up 52% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Irani Papel e Embalagem has delivered an average of 21% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is Irani Papel e Embalagem worth buying for its dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, Irani Papel e Embalagem has 4 warning signs (and 2 which are potentially serious) we think you should know about.

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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.