Banco Latinoamericano de Comercio Exterior (NYSE:BLX) Has Announced A 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 on the 24th of August, with investors receiving US$0.25 per share. This means the annual payment is 6.1% of the current stock price, which is above the average for the industry.

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 was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Unless the company can turn things around, EPS could fall by 11.7% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 75%, 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 2011, the first annual payment was US$0.68, compared to the most recent full-year payment of US$1.00. This means that it has been growing its distributions at 3.9% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Banco Latinoamericano de Comercio Exterior's EPS has fallen by approximately 12% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Banco Latinoamericano de Comercio Exterior is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Banco Latinoamericano de Comercio Exterior you should be aware of, and 1 of them is a bit unpleasant. We have also put together a list of global stocks with a solid dividend.

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