Don't Race Out To Buy Banco Latinoamericano de Comercio Exterior, S.A (NYSE:BLX) Just Because It's Going Ex-Dividend

By
Simply Wall St
Published
February 18, 2021
NYSE:BLX

Banco Latinoamericano de Comercio Exterior, S.A (NYSE:BLX) stock is about to trade ex-dividend in 3 days. Ex-dividend means that investors that purchase the stock on or after the 22nd of February will not receive this dividend, which will be paid on the 10th of March.

Banco Latinoamericano de Comercio Exterior's next dividend payment will be US$0.25 per share. Last year, in total, the company distributed US$1.00 to shareholders. Based on the last year's worth of payments, Banco Latinoamericano de Comercio Exterior has a trailing yield of 6.3% on the current stock price of $15.76. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Banco Latinoamericano de Comercio Exterior

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Banco Latinoamericano de Comercio Exterior paid out 62% of its earnings to investors last year, a normal payout level for most businesses.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit Banco Latinoamericano de Comercio Exterior paid out over the last 12 months.

historic-dividend
NYSE:BLX Historic Dividend February 18th 2021

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Banco Latinoamericano de Comercio Exterior's earnings per share have fallen at approximately 9.7% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Banco Latinoamericano de Comercio Exterior has lifted its dividend by approximately 5.2% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

To Sum It Up

Is Banco Latinoamericano de Comercio Exterior an attractive dividend stock, or better left on the shelf? We're not overly enthused to see Banco Latinoamericano de Comercio Exterior's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

With that being said, if you're still considering Banco Latinoamericano de Comercio Exterior as an investment, you'll find it beneficial to know what risks this stock is facing. To that end, you should learn about the 2 warning signs we've spotted with Banco Latinoamericano de Comercio Exterior (including 1 which is a bit unpleasant).

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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