Just Three Days Till Operadora de Sites Mexicanos, S.A.B. de C.V. (BMV:SITES1A-1) Will Be Trading Ex-Dividend

Operadora de Sites Mexicanos, S.A.B. de C.V. (BMV:SITES1A-1) is about to trade ex-dividend in the next three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Operadora de Sites Mexicanos. de's shares on or after the 29th of May, you won't be eligible to receive the dividend, when it is paid on the 30th of May.

The company's upcoming dividend is Mex$0.50 a share, following on from the last 12 months, when the company distributed a total of Mex$0.50 per share to shareholders. Calculating the last year's worth of payments shows that Operadora de Sites Mexicanos. de has a trailing yield of 2.4% on the current share price of Mex$20.77. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Operadora de Sites Mexicanos. de can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year, Operadora de Sites Mexicanos. de paid out 268% of its profit to shareholders in the form of dividends. This is not sustainable behaviour and requires a closer look on behalf of the purchaser. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 20% of its free cash flow in the last year.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Operadora de Sites Mexicanos. de fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

View our latest analysis for Operadora de Sites Mexicanos. de

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Operadora de Sites Mexicanos. de has grown its earnings rapidly, up 38% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past three years, Operadora de Sites Mexicanos. de has increased its dividend at approximately 1.4% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Operadora de Sites Mexicanos. de is keeping back more of its profits to grow the business.

To Sum It Up

Is Operadora de Sites Mexicanos. de worth buying for its dividend? It's good to see earnings per share growing and low cashflow payout ratio, although we're uncomfortable with Operadora de Sites Mexicanos. de's paying out such a high percentage of its profit. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

While it's tempting to invest in Operadora de Sites Mexicanos. de for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for Operadora de Sites Mexicanos. de that we strongly recommend you have a look at before investing in the company.

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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.