Stock Analysis

Quálitas Controladora. de (BMV:Q) Is Paying Out A Larger Dividend Than Last Year

BMV:Q *
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Quálitas Controladora, S.A.B. de C.V.'s (BMV:Q) dividend will be increasing from last year's payment of the same period to MX$4.00 on 8th of May. The payment will take the dividend yield to 3.8%, which is in line with the average for the industry.

See our latest analysis for Quálitas Controladora. de

Quálitas Controladora. de's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Quálitas Controladora. de's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 147% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Over the next year, EPS is forecast to expand by 71.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 46%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

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BMV:Q * Historic Dividend May 3rd 2024

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was MX$0.80 in 2014, and the most recent fiscal year payment was MX$8.00. This means that it has been growing its distributions at 26% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 13% over the last three years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Quálitas Controladora. de's payments are rock solid. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Quálitas Controladora. de that investors should know about before committing capital to this stock. Is Quálitas Controladora. de not quite the opportunity you were looking for? Why not check out our selection of top 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.