Considerations Before Buying Veracruz Properties SOCIMI, S.A. (BME:YVCP) For Its Upcoming Dividend

Readers hoping to buy Veracruz Properties SOCIMI, S.A. ( BME:YVCP ) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Meaning, you will need to purchase Veracruz Properties SOCIMI's shares before the 27th of February to receive the dividend, which will be paid on the 3rd of March.

The company's next dividend payment will be €0.2539712 per share, on the back of last year when the company paid a total of €1.04 to shareholders. Last year's total dividend payments show that Veracruz Properties SOCIMI has a trailing yield of 3.4% on the current share price of €30.40. If you buy this business for its dividend, you should have an idea of whether Veracruz Properties SOCIMI's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Veracruz Properties SOCIMI

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. Last year Veracruz Properties SOCIMI paid out 93% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. 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 paid out 84% 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 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 this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.

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 falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. So we're not too excited that Veracruz Properties SOCIMI's earnings per share are down since FY2018. However, earnings have been improving over the last 5 years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past four years, Veracruz Properties SOCIMI has increased its dividend at approximately 16% a year on average.

Final Takeaway

Is Veracruz Properties SOCIMI an attractive dividend stock, or better left on the shelf? Earnings per share have declined since FY18, which is not encouraging but they have been improving in the years following. Veracruz Properties SOCIMI's paying out a majority of its earnings but much less of its free cash flow. Positive cash flows are good news but we'd like to see further improvement in earnings before finding this one attractive from a dividend perspective.

Although, if you're still interested in Veracruz Properties SOCIMI and want to know more, you'll find it very useful to know what risks this stock faces. Every company has risks, and we've spotted 3 warning signs for Veracruz Properties SOCIMI (of which 1 can'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.

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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.