Banco Latinoamericano de Comercio Exterior (NYSE:BLX) Has Affirmed Its Dividend Of US$0.25

The board of Banco Latinoamericano de Comercio Exterior, S.A (NYSE:BLX) has announced that it will pay a dividend of US$0.25 per share on the 22nd of March. Based on this payment, the dividend yield on the company's stock will be 6.5%, which is an attractive boost to shareholder returns.

View our latest analysis for Banco Latinoamericano de Comercio Exterior

Banco Latinoamericano de Comercio Exterior's Earnings Easily Cover the Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Banco Latinoamericano de Comercio Exterior's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, EPS could fall by 6.6% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 64%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the first annual payment was US$0.80, compared to the most recent full-year payment of US$1.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.3% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, Banco Latinoamericano de Comercio Exterior's earnings per share has shrunk at approximately 6.6% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Banco Latinoamericano de Comercio Exterior's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Banco Latinoamericano de Comercio Exterior is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Banco Latinoamericano de Comercio Exterior (1 is significant!) that you should be aware of before investing. Is Banco Latinoamericano de Comercio Exterior 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.