It looks like EZTEC Empreendimentos e Participações S.A. (BVMF:EZTC3) is about to go ex-dividend in the next three days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase EZTEC Empreendimentos e Participações' shares on or after the 14th of August will not receive the dividend, which will be paid on the 28th of August.
The company's next dividend payment will be R$0.0945661 per share. Last year, in total, the company distributed R$0.20 to shareholders. Looking at the last 12 months of distributions, EZTEC Empreendimentos e Participações has a trailing yield of approximately 1.9% on its current stock price of R$10.76. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. EZTEC Empreendimentos e Participações is paying out an acceptable 61% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether EZTEC Empreendimentos e Participações generated enough free cash flow to afford its dividend. It paid out more than half (59%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that EZTEC Empreendimentos e Participações's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
View our latest analysis for EZTEC Empreendimentos e Participações
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see EZTEC Empreendimentos e Participações earnings per share are up 6.3% per annum over the last five years. Decent historical earnings per share growth suggests EZTEC Empreendimentos e Participações has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. EZTEC Empreendimentos e Participações has seen its dividend decline 7.0% per annum on average over the past 10 years, which is not great to see. EZTEC Empreendimentos e Participações is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
The Bottom Line
Should investors buy EZTEC Empreendimentos e Participações for the upcoming dividend? Earnings per share have been growing modestly and EZTEC Empreendimentos e Participações paid out a bit over half of its earnings and free cash flow last year. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of EZTEC Empreendimentos e Participações's dividend merits.
Wondering what the future holds for EZTEC Empreendimentos e Participações? See what the nine analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.