Four Days Left Until Wilson Sons S.A. (BVMF:PORT3) Trades Ex-Dividend

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 Wilson Sons S.A. (BVMF:PORT3) is about to go ex-dividend in just four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Thus, you can purchase Wilson Sons' shares before the 29th of April in order to receive the dividend, which the company will pay on the 6th of May.

The company's next dividend payment will be R$0.1716589 per share, on the back of last year when the company paid a total of R$0.46 to shareholders. Looking at the last 12 months of distributions, Wilson Sons has a trailing yield of approximately 3.7% on its current stock price of R$16.80. 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 investigate whether Wilson Sons can afford its dividend, and if the dividend could grow.

See our latest analysis for Wilson Sons

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. Wilson Sons is paying out an acceptable 69% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Wilson Sons generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (85%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Wilson Sons's earnings per share have been growing at 18% a year for the past five years. The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. We're surprised that management has not elected to reinvest more in the business to accelerate growth further.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Wilson Sons has delivered an average of 18% per year annual increase in its dividend, based on the past two years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Is Wilson Sons an attractive dividend stock, or better left on the shelf? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Wilson Sons's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 69% and 85% respectively. In summary, while it has some positive characteristics, we're not inclined to race out and buy Wilson Sons today.

In light of that, while Wilson Sons has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 3 warning signs for Wilson Sons (of which 1 shouldn't be ignored!) you should know about.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.