Stock Analysis

Should You Buy Popular, Inc. (NASDAQ:BPOP) For Its Upcoming Dividend?

  •  Updated
NasdaqGS:BPOP
Source: Shutterstock

Popular, Inc. (NASDAQ:BPOP) is about to trade ex-dividend in the next four days. This means that investors who purchase shares on or after the 10th of December will not receive the dividend, which will be paid on the 4th of January.

Popular's next dividend payment will be US$0.40 per share. Last year, in total, the company distributed US$1.60 to shareholders. Last year's total dividend payments show that Popular has a trailing yield of 3.1% on the current share price of $52.12. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Popular

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Popular paying out a modest 27% of its earnings.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

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

historic-dividend
NasdaqGS:BPOP Historic Dividend December 5th 2020

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Popular's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Popular has delivered an average of 22% per year annual increase in its dividend, based on the past five years of dividend payments.

The Bottom Line

Is Popular an attractive dividend stock, or better left on the shelf? Popular has seen its earnings per share stagnate in recent years, although the company reinvests more than half of its profits in the business, which could bode well for its future prospects. Popular ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

So while Popular looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Popular has 2 warning signs we think you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

If you decide to trade Popular, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted


What are the risks and opportunities for Popular?

Popular, Inc., through its subsidiaries, provides various retail, mortgage, and commercial banking products and services in Puerto Rico, the United States, and British Virgin Islands.

View Full Analysis

Rewards

  • Trading at 60.9% below our estimate of its fair value

  • Earnings grew by 18% over the past year

Risks

  • Earnings are forecast to decline by an average of 25% per year for the next 3 years

View all Risks and Rewards

Share Price

Market Cap

1Y Return

View Company Report