Could Vinte Viviendas Integrales, S.A.B. de C.V. (BMV:VINTE) be an attractive dividend share to own for the long haul? Investors are often drawn to strong companies with the idea of reinvesting the dividends. On the other hand, investors have been known to buy a stock because of its yield, and then lose money if the company’s dividend doesn’t live up to expectations.
In this case, Vinte Viviendas Integrales. de likely looks attractive to dividend investors, given its 4.0% dividend yield and four-year payment history. We’d agree the yield does look enticing. Some simple research can reduce the risk of buying Vinte Viviendas Integrales. de for its dividend – read on to learn more.
Explore this interactive chart for our latest analysis on Vinte Viviendas Integrales. de!
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. So we need to form a view on if a company’s dividend is sustainable, relative to its net profit after tax. Vinte Viviendas Integrales. de paid out 55% of its profit as dividends, over the trailing twelve month period. This is a healthy payout ratio, and while it does limit the amount of earnings that can be reinvested in the business, there is also some room to lift the payout ratio over time.
In addition to comparing dividends against profits, we should inspect whether the company generated enough cash to pay its dividend. Last year, Vinte Viviendas Integrales. de paid a dividend while reporting negative free cash flow. While there may be an explanation, we think this behaviour is generally not sustainable.
We update our data on Vinte Viviendas Integrales. de every 24 hours, so you can always get our latest analysis of its financial health, here.
One of the major risks of relying on dividend income, is the potential for a company to struggle financially and cut its dividend. Not only is your income cut, but the value of your investment declines as well – nasty. Vinte Viviendas Integrales. de has been paying a dividend for the past four years. The company has been paying a stable dividend for a few years now, but we’d like to see more evidence of consistency over a longer period. During the past four-year period, the first annual payment was Mex$0.9 in 2017, compared to Mex$1.1 last year. This works out to be a compound annual growth rate (CAGR) of approximately 7.0% a year over that time.
The dividend has been growing at a reasonable rate, which we like. We’re conscious though that one of the best ways to detect a multi-decade consistent dividend-payer, is to watch a company pay dividends for 20 years – a distinction Vinte Viviendas Integrales. de has not achieved yet.
Dividend Growth Potential
Dividend payments have been consistent over the past few years, but we should always check if earnings per share (EPS) are growing, as this will help maintain the purchasing power of the dividend. While there may be fluctuations in the past , Vinte Viviendas Integrales. de’s earnings per share have basically not grown from where they were five years ago. Over the long term, steady earnings per share is a risk as the value of the dividends can be reduced by inflation. 1.5% per annum is not a particularly high rate of growth, which we find curious. If the company is struggling to grow, perhaps that’s why it elects to pay out more than half of its earnings to shareholders.
Dividend investors should always want to know if a) a company’s dividends are affordable, b) if there is a track record of consistent payments, and c) if the dividend is capable of growing. Vinte Viviendas Integrales. de’s payout ratios are within a normal range for the average corporation, and we like that its cashflow was stronger than reported profits. Second, the company has not been able to generate earnings growth, and its history of dividend payments is shorter than we consider ideal (from a reliability perspective). In sum, we find it hard to get excited about Vinte Viviendas Integrales. de from a dividend perspective. It’s not that we think it’s a bad business; just that there are other companies that perform better on these criteria.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we’ve identified 3 warning signs for Vinte Viviendas Integrales. de (1 can’t be ignored!) that you should be aware of before investing.
If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 3%.
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