Quálitas Controladora. de's (BMV:Q) Dividend Will Be 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 4.3%, providing a nice boost to shareholder returns.

View our latest analysis for Quálitas Controladora. de

Quálitas Controladora. de's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. 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.

Looking forward, earnings per share is forecast to rise by 74.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 55%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

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. Since 2014, the annual payment back then was MX$0.80, compared to the most recent full-year payment of MX$8.00. This means that it has been growing its distributions at 26% per annum over that time. 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. Quálitas Controladora. de's earnings per share has shrunk at 13% a year over the past 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

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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Quálitas Controladora. de that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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