Four Days Left To Buy Moura Dubeux Engenharia S.A. (BVMF:MDNE3) Before The Ex-Dividend Date

Moura Dubeux Engenharia S.A. (BVMF:MDNE3) is about to trade ex-dividend in the next 4 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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. In other words, investors can purchase Moura Dubeux Engenharia's shares before the 22nd of May in order to be eligible for the dividend, which will be paid on the 30th of May.

The company's next dividend payment will be R$0.5940764 per share. Last year, in total, the company distributed R$1.30 to shareholders. Based on the last year's worth of payments, Moura Dubeux Engenharia has a trailing yield of 6.6% on the current stock price of R$19.76. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Moura Dubeux Engenharia can afford its dividend, and if the dividend could grow.

We've discovered 2 warning signs about Moura Dubeux Engenharia. View them for free.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Moura Dubeux Engenharia is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. Moura Dubeux Engenharia paid out more free cash flow than it generated - 141%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

While Moura Dubeux Engenharia's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Moura Dubeux Engenharia to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

See our latest analysis for Moura Dubeux Engenharia

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. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Moura Dubeux Engenharia's earnings have been skyrocketing, up 63% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Unfortunately Moura Dubeux Engenharia has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

Has Moura Dubeux Engenharia got what it takes to maintain its dividend payments? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

While it's tempting to invest in Moura Dubeux Engenharia for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for Moura Dubeux Engenharia that you should be aware of before investing in their shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.