Is Unifin Financiera, S. A. B. de C. V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada (BMV:UNIFINA) a good dividend stock? How can we tell? Dividend paying companies with growing earnings can be highly rewarding in the long term. Unfortunately, it’s common for investors to be enticed in by the seemingly attractive yield, and lose money when the company has to cut its dividend payments.
Unifin Financiera S. A. B. de C. V. Sociedad Financiera de Objeto Múltiple Entidad No Regulada pays a 3.3% dividend yield, and has been paying dividends for the past two years. A high yield probably looks enticing, but investors are likely wondering about the short payment history. When buying stocks for their dividends, you should always run through the checks below, to see if the dividend looks sustainable.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. So we need to form a view on if a company’s dividend is sustainable, relative to its net profit after tax. Looking at the data, we can see that 17% of Unifin Financiera S. A. B. de C. V. Sociedad Financiera de Objeto Múltiple Entidad No Regulada’s profits were paid out as dividends in the last 12 months. We like this low payout ratio, because it implies the dividend is well covered and leaves ample opportunity for reinvestment.
Remember, you can always get a snapshot of Unifin Financiera S. A. B. de C. V. Sociedad Financiera de Objeto Múltiple Entidad No Regulada’s latest financial position, by checking our visualisation of its financial health.
One of the major risks of relying on dividend income, is the potential for a company to struggle financially and cut its dividend. Not only is your income cut, but the value of your investment declines as well – nasty. The dividend has not fluctuated much, but with a relatively short payment history, we can’t be sure this is sustainable across a full market cycle. Its most recent annual dividend was Mex$1.00 per share, effectively flat on its first payment two years ago.
We like that the dividend hasn’t been shrinking. However we’re conscious that the company hasn’t got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.
Dividend Growth Potential
Dividend payments have been consistent over the past few years, but we should always check if earnings per share (EPS) are growing, as this will help maintain the purchasing power of the dividend. It’s good to see Unifin Financiera S. A. B. de C. V. Sociedad Financiera de Objeto Múltiple Entidad No Regulada has been growing its earnings per share at 43% a year over the past five years. The company is only paying out a fraction of its earnings as dividends, and in the past been able to use the retained earnings to grow its profits rapidly – an ideal combination.
To summarise, shareholders should always check that Unifin Financiera S. A. B. de C. V. Sociedad Financiera de Objeto Múltiple Entidad No Regulada’s dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. We’re glad to see Unifin Financiera S. A. B. de C. V. Sociedad Financiera de Objeto Múltiple Entidad No Regulada has a low payout ratio, as this suggests earnings are being reinvested in the business. Next, earnings growth has been good, but unfortunately the company has not been paying dividends as long as we’d like. Unifin Financiera S. A. B. de C. V. Sociedad Financiera de Objeto Múltiple Entidad No Regulada has a number of positive attributes, but falls short of our ideal dividend company. It may be worth a look at the right price, though.
You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Unifin Financiera S. A. B. de C. V. Sociedad Financiera de Objeto Múltiple Entidad No Regulada stock.
If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 3%.
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