Is It Smart To Buy Promotora y Operadora de Infraestructura, S. A. B. de C. V. (BMV:PINFRA) Before It Goes Ex-Dividend?

Readers hoping to buy Promotora y Operadora de Infraestructura, S. A. B. de C. V. (BMV:PINFRA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, 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 two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Promotora y Operadora de Infraestructura S. A. B. de C. V investors that purchase the stock on or after the 16th of October will not receive the dividend, which will be paid on the 17th of October.

The company's next dividend payment will be Mex$2.663531 per share. Last year, in total, the company distributed Mex$5.32 to shareholders. Looking at the last 12 months of distributions, Promotora y Operadora de Infraestructura S. A. B. de C. V has a trailing yield of approximately 3.0% on its current stock price of Mex$179.56. If you buy this business for its dividend, you should have an idea of whether Promotora y Operadora de Infraestructura S. A. B. de C. V's dividend is reliable and sustainable. As a result, readers should always check whether Promotora y Operadora de Infraestructura S. A. B. de C. V has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Promotora y Operadora de Infraestructura S. A. B. de C. V

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Promotora y Operadora de Infraestructura S. A. B. de C. V is paying out just 15% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Promotora y Operadora de Infraestructura S. A. B. de C. V generated enough free cash flow to afford its dividend. It paid out 14% of its free cash flow as dividends last year, which is conservatively low.

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.

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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Promotora y Operadora de Infraestructura S. A. B. de C. V, with earnings per share up 8.4% on average over the last five years. Earnings per share have been increasing steadily and management is reinvesting almost all of the profits back into the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Promotora y Operadora de Infraestructura S. A. B. de C. V has delivered 21% dividend growth per year on average over the past nine years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Is Promotora y Operadora de Infraestructura S. A. B. de C. V worth buying for its dividend? Earnings per share have been growing moderately, and Promotora y Operadora de Infraestructura S. A. B. de C. V is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Promotora y Operadora de Infraestructura S. A. B. de C. V is halfway there. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Promotora y Operadora de Infraestructura S. A. B. de C. V is facing. To help with this, we've discovered 2 warning signs for Promotora y Operadora de Infraestructura S. A. B. de C. V that you should be aware of before investing in their shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.