Banco Latinoamericano de Comercio Exterior S. A (NYSE:BLX) Is Paying Out A Dividend Of $0.25

The board of Banco Latinoamericano de Comercio Exterior, S. A. (NYSE:BLX) has announced that it will pay a dividend of $0.25 per share on the 30th of November. Based on this payment, the dividend yield on the company's stock will be 6.2%, which is an attractive boost to shareholder returns.

Our analysis indicates that BLX is potentially undervalued!

Banco Latinoamericano de Comercio Exterior S. A's Payment Expected To Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Having distributed dividends for at least 10 years, Banco Latinoamericano de Comercio Exterior S. A has a long history of paying out a part of its earnings to shareholders. Based on Banco Latinoamericano de Comercio Exterior S. A's last earnings report, the payout ratio is at a decent 45%, meaning that the company is able to pay out its dividend with a bit of room to spare.

If the trend of the last few years continues, EPS will grow by 3.3% over the next 12 months. If the dividend continues on this path, the future payout ratio could be 40% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The last annual payment of $1.00 was flat on the annual payment from10 years ago. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Banco Latinoamericano de Comercio Exterior S. A May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Banco Latinoamericano de Comercio Exterior S. A has only grown its earnings per share at 3.3% per annum over the past five years. Growth of 3.3% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Banco Latinoamericano de Comercio Exterior S. A's Dividend

Overall, we think Banco Latinoamericano de Comercio Exterior S. A is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Banco Latinoamericano de Comercio Exterior S. A that investors should take into consideration. Is Banco Latinoamericano de Comercio Exterior S. A not quite the opportunity you were looking for? Why not check out our selection of top 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.