Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Caixa Seguridade Participações S.A. (BVMF:CXSE3) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Caixa Seguridade Participações’ shares before the 6th of January in order to receive the dividend, which the company will pay on the 17th of January.

The company’s upcoming dividend is R$0.31 a share, following on from the last 12 months, when the company distributed a total of R$0.82 per share to shareholders. Last year’s total dividend payments show that Caixa Seguridade Participações has a trailing yield of 5.8% on the current share price of R$14.25. If you buy this business for its dividend, you should have an idea of whether Caixa Seguridade Participações’s dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it’s growing.

View our latest analysis for Caixa Seguridade Participações

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Last year Caixa Seguridade Participações paid out 92% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings.

When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.

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. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Caixa Seguridade Participações’s earnings per share have been growing at 19% a year for the past five years.

The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, three years ago, Caixa Seguridade Participações has lifted its dividend by approximately 19% a year on average. It’s great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

From a dividend perspective, should investors buy or avoid Caixa Seguridade Participações? We’re not enthused to see Caixa Seguridade Participações’s dividend was not well covered by earnings over the last year, although it is great to see earnings growing. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we’re on the fence about its dividend prospects.

With that being said, if dividends aren’t your biggest concern with Caixa Seguridade Participações, you should know about the other risks facing this business. Every company has risks, and we’ve spotted 2 warning signs for Caixa Seguridade Participações you should know about.

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.