Quálitas Controladora. de (BMV:Q) Will Pay A Dividend Of MX$4.00

The board of Quálitas Controladora, S.A.B. de C.V. (BMV:Q) has announced that it will pay a dividend on the 8th of November, with investors receiving MX$4.00 per share. This will take the dividend yield to an attractive 4.4%, providing a nice boost to shareholder returns.

Check out our latest analysis for Quálitas Controladora. de

Quálitas Controladora. de's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Quálitas Controladora. de was paying out quite a large proportion of both earnings and cash flow, with the dividend being 147% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

The next year is set to see EPS grow by 72.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 56%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from MX$0.80 total annually to MX$8.00. This implies that the company grew its distributions at a yearly rate of about 26% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past three years, it looks as though Quálitas Controladora. de's EPS has declined at around 13% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Quálitas Controladora. de will make a great income stock. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.

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 instance, we've picked out 2 warning signs for Quálitas Controladora. de that investors should take into consideration. 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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