Here's Why We're Wary Of Buying Banco Latinoamericano de Comercio Exterior's (NYSE:BLX) For Its Upcoming Dividend
It looks like Banco Latinoamericano de Comercio Exterior, S.A (NYSE:BLX) is about to go ex-dividend in the next four days. You will need to purchase shares before the 7th of August to receive the dividend, which will be paid on the 25th of August.
Banco Latinoamericano de Comercio Exterior's upcoming dividend is US$0.25 a share, following on from the last 12 months, when the company distributed a total of US$1.00 per share to shareholders. Last year's total dividend payments show that Banco Latinoamericano de Comercio Exterior has a trailing yield of 8.6% on the current share price of $11.67. If you buy this business for its dividend, you should have an idea of whether Banco Latinoamericano de Comercio Exterior's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Banco Latinoamericano de Comercio Exterior
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. Banco Latinoamericano de Comercio Exterior paid out 54% of its earnings to investors last year, a normal payout level for most businesses.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Banco Latinoamericano de Comercio Exterior's earnings per share have dropped 6.5% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Banco Latinoamericano de Comercio Exterior has lifted its dividend by approximately 5.2% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.
To Sum It Up
Is Banco Latinoamericano de Comercio Exterior an attractive dividend stock, or better left on the shelf? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. Banco Latinoamericano de Comercio Exterior doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the 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. Our analysis shows 3 warning signs for Banco Latinoamericano de Comercio Exterior that we strongly recommend you have a look at before investing in the company.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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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