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- BMV:VESTA *
What To Know Before Buying Corporación Inmobiliaria Vesta S.A.B. de C.V. (BMV:VESTA) For Its Dividend
Is Corporación Inmobiliaria Vesta S.A.B. de C.V. (BMV:VESTA) a good dividend stock? How can we tell? Dividend paying companies with growing earnings can be highly rewarding in the long term. Yet sometimes, investors buy a popular dividend stock because of its yield, and then lose money if the company's dividend doesn't live up to expectations.
With a eight-year payment history and a 4.4% yield, many investors probably find Corporación Inmobiliaria Vesta. de intriguing. It sure looks interesting on these metrics - but there's always more to the story. The company also bought back stock equivalent to around 1.2% of market capitalisation this year. Some simple research can reduce the risk of buying Corporación Inmobiliaria Vesta. de for its dividend - read on to learn more.
Explore this interactive chart for our latest analysis on Corporación Inmobiliaria Vesta. de!
Payout ratios
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. Comparing dividend payments to a company's net profit after tax is a simple way of reality-checking whether a dividend is sustainable. Looking at the data, we can see that 81% of Corporación Inmobiliaria Vesta. de's profits were paid out as dividends in the last 12 months. It's paying out most of its earnings, which limits the amount that can be reinvested in the business. This may indicate limited need for further capital within the business, or highlight a commitment to paying a dividend.
Another important check we do is to see if the free cash flow generated is sufficient to pay the dividend. Corporación Inmobiliaria Vesta. de paid out 55% of its cash flow as dividends last year, which is within a reasonable range for the average corporation. It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Consider getting our latest analysis on Corporación Inmobiliaria Vesta. de's financial position here.
Dividend Volatility
Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. Looking at the last decade of data, we can see that Corporación Inmobiliaria Vesta. de paid its first dividend at least eight years ago. Although it has been paying a dividend for several years now, the dividend has been cut at least once, and we're cautious about the consistency of its dividend across a full economic cycle. During the past eight-year period, the first annual payment was US$0.03 in 2013, compared to US$0.09 last year. Dividends per share have grown at approximately 17% per year over this time. The dividends haven't grown at precisely 17% every year, but this is a useful way to average out the historical rate of growth.
So, its dividends have grown at a rapid rate over this time, but payments have been cut in the past. The stock may still be worth considering as part of a diversified dividend portfolio.
Dividend Growth Potential
With a relatively unstable dividend, it's even more important to see if earnings per share (EPS) are growing. Why take the risk of a dividend getting cut, unless there's a good chance of bigger dividends in future? It's good to see Corporación Inmobiliaria Vesta. de has been growing its earnings per share at 18% a year over the past five years. EPS are growing rapidly, although the company is also paying out more than three-quarters of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.
Conclusion
To summarise, shareholders should always check that Corporación Inmobiliaria Vesta. de's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. Corporación Inmobiliaria Vesta. de's is paying out more than half its income as dividends, but at least the dividend is covered by both reported earnings and cashflow. Next, earnings growth has been good, but unfortunately the dividend has been cut at least once in the past. In sum, we find it hard to get excited about Corporación Inmobiliaria Vesta. de from a dividend perspective. It's not that we think it's a bad business; just that there are other companies that perform better on these criteria.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come accross 4 warning signs for Corporación Inmobiliaria Vesta. de you should be aware of, and 1 of them makes us a bit uncomfortable.
Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.
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This article by Simply Wall St is general in nature. 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.
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About BMV:VESTA *
Corporación Inmobiliaria Vesta. de
Acquires, develops, manages, operates, and leases industrial buildings and distribution facilities in Mexico.
Established dividend payer and good value.