Banco Latinoamericano de Comercio Exterior (NYSE:BLX) Has Affirmed Its Dividend Of US$0.25

Simply Wall St

Sat, Jul 31, 2021, 1:05 AM 3 min read

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Banco Latinoamericano de Comercio Exterior was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Unless the company can turn things around, EPS could fall by 11.7% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 75%, which is definitely feasible to continue.

historic-dividend — NYSE:BLX Historic Dividend July 31st 2021

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2011, the first annual payment was US$0.68, compared to the most recent full-year payment of US$1.00. This means that it has been growing its distributions at 3.9% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Banco Latinoamericano de Comercio Exterior's EPS has declined at around 12% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Banco Latinoamericano de Comercio Exterior's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.

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 2 warning signs for Banco Latinoamericano de Comercio Exterior (1 is a bit unpleasant!) that you should be aware of before investing. We have also put together a list of global stocks with a solid 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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