Interested In Inmobiliaria del Sur's (BME:ISUR) Upcoming €0.16 Dividend? You Have Four Days Left

Inmobiliaria del Sur, S.A. (BME:ISUR) stock is about to trade ex-dividend in four days. Investors can purchase shares before the 13th of January in order to be eligible for this dividend, which will be paid on the 15th of January.

Inmobiliaria del Sur's next dividend payment will be €0.16 per share, on the back of last year when the company paid a total of €0.32 to shareholders. Calculating the last year's worth of payments shows that Inmobiliaria del Sur has a trailing yield of 3.9% on the current share price of €8.22. 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 Inmobiliaria del Sur can afford its dividend, and if the dividend could grow.

See our latest analysis for Inmobiliaria del Sur

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. Inmobiliaria del Sur is paying out just 12% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year, it paid out dividends equivalent to 305% of what it generated in free cash flow, a disturbingly high percentage. It's pretty hard to pay out more than you earn, so we wonder how Inmobiliaria del Sur intends to continue funding this dividend, or if it could be forced to cut the payment.

While Inmobiliaria del Sur'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 Inmobiliaria del Sur to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see how much of its profit Inmobiliaria del Sur 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 earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Inmobiliaria del Sur's earnings have been skyrocketing, up 42% 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Inmobiliaria del Sur's dividend payments are broadly unchanged compared to where they were 10 years ago.

Final Takeaway

Has Inmobiliaria del Sur 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 we're not hugely bearish on the stock, but there are likely better dividend investments out there.

On that note, you'll want to research what risks Inmobiliaria del Sur is facing. Be aware that Inmobiliaria del Sur is showing 4 warning signs in our investment analysis, and 2 of those don't sit too well with us...

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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