Should income investors watch Plaza SA (SNSE:MALLPLAZA) ahead of its ex-dividend?

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Readers hoping to buy Plaza S.A. (SNSE:MALLPLAZA) for its dividend will have to come shortly, as the stock is set to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day shareholders must be on the books of the company to receive a dividend. The ex-dividend date is important because each time a stock is bought or sold, the transaction takes at least two business days to settle. That means you’ll need to buy Plaza shares by October 14 to receive the dividend, which will be paid on October 19.

The upcoming dividend for Plaza is CL$14.00 per share, up from last year’s total dividend per share of CL$10.90. Dividends contribute greatly to investment returns for long-term holders, but only if the dividend continues to be paid. We need to see if the dividend is covered by earnings and if it increases.

Our analysis indicates that MALLPLAZA is potentially undervalued!

Dividends are usually paid out of company profits. If a company pays out more dividends than it earns in profits, then the dividend could be unsustainable. Plaza paid out 65% of its profits to investors last year, a normal payout level for most companies. That said, even very profitable companies can sometimes not generate enough cash to pay the dividend, so we should always check if the dividend is covered by cash flow. It paid out 8.5% of its free cash flow in the form of dividends last year, which is prudent.

It’s positive to see Plaza’s dividend being covered by both earnings and cash flow, as it’s usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a higher payout margin. safety before the dividend is reduced.

Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.

SNSE:MALLPLAZA Historic dividend October 10, 2022

Have earnings and dividends increased?

Companies with declining profits are tricky from a dividend perspective. If earnings fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. With that in mind, we’re bothered by Plaza’s revenue decline of 13% per year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid out shrinks.

Many investors will gauge a company’s dividend yield by evaluating how much dividend payouts have changed over time. Over the past four years, Plaza has increased its dividend by about 18% per year on average. Raising the dividend payout ratio as earnings decline can deliver good returns for a while, but it’s always worth checking to see if the company can’t raise the payout ratio any further – because then the music stops. .

The essential

Is Plaza worth buying for its dividend? We’re not excited about the drop in earnings per share, although at least the company’s payout ratio is in a reasonable range, meaning it may not be at imminent risk. dividend reduction. Overall, we’re not extremely bearish on the stock, but there are probably better dividend investments out there.

While you’re not too concerned about Plaza’s ability to pay dividends, you should still keep in mind some of the other risks this company faces. For example, we found 1 warning sign for Plaza which we recommend you consider before investing in the company.

If you are looking for good dividend payers, we recommend by consulting our selection of the best dividend-paying stocks.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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