Quálitas Controladora. de's (BMV:Q) Dividend Will Be MX$5.00

Quálitas Controladora, S.A.B. de C.V. (BMV:Q) will pay a dividend of MX$5.00 on the 7th of November. Based on this payment, the dividend yield for the company will be 3.6%, which is fairly typical for the industry.

We've discovered 2 warning signs about Quálitas Controladora. de. View them for free.

Quálitas Controladora. de's Projected Earnings Seem Likely To Cover Future Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last dividend, Quálitas Controladora. de is earning enough to cover the payment, but then it makes up 107% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

The next year is set to see EPS grow by 23.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 68% by next year, which is in a pretty sustainable range.

View our latest analysis for Quálitas Controladora. de

Quálitas Controladora. de's Dividend Has Lacked Consistency

Looking back, Quálitas Controladora. de's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2016, the annual payment back then was MX$0.50, compared to the most recent full-year payment of MX$8.00. This implies that the company grew its distributions at a yearly rate of about 36% over that duration. Quálitas Controladora. de has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings have grown at around 2.3% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 2.3% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On Quálitas Controladora. de's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs 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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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.