Should Income Investors Look At Veracruz Properties SOCIMI, S.A. (BME:YVCP) Before Its Ex-Dividend?

It looks like Veracruz Properties SOCIMI, S.A. (BME:YVCP) is about to go ex-dividend in the next day or two. 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Veracruz Properties SOCIMI's shares on or after the 14th of July, you won't be eligible to receive the dividend, when it is paid on the 16th of July.

The company's upcoming dividend is €0.2936049 a share, following on from the last 12 months, when the company distributed a total of €1.13 per share to shareholders. Last year's total dividend payments show that Veracruz Properties SOCIMI has a trailing yield of 3.8% on the current share price of €30.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's 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. Veracruz Properties SOCIMI paid out 90% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 47% of its free cash flow as dividends, a comfortable payout level for most companies.

It's good to see that while Veracruz Properties SOCIMI's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

Check out our latest analysis for Veracruz Properties SOCIMI

Click here to see how much of its profit Veracruz Properties SOCIMI paid out over the last 12 months.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Veracruz Properties SOCIMI, with earnings per share up 8.4% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last four years, Veracruz Properties SOCIMI has lifted its dividend by approximately 19% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Veracruz Properties SOCIMI an attractive dividend stock, or better left on the shelf? Earnings per share have grown modestly, and last year Veracruz Properties SOCIMI paid out a low percentage of its cash flow. However, its dividend payments were not well covered by profits. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Veracruz Properties SOCIMI's dividend merits.

With that being said, if dividends aren't your biggest concern with Veracruz Properties SOCIMI, you should know about the other risks facing this business. To help with this, we've discovered 2 warning signs for Veracruz Properties SOCIMI that you should be aware of before investing in their shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.