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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Popular, Inc. (NASDAQ:BPOP) is about to go ex-dividend in just 3 days. You can purchase shares before the 12th of September in order to receive the dividend, which the company will pay on the 1st of October.
Popular's upcoming dividend is US$0.30 a share, following on from the last 12 months, when the company distributed a total of US$1.20 per share to shareholders. Last year's total dividend payments show that Popular has a trailing yield of 2.3% on the current share price of $52.97. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Popular
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Popular is paying out just 19% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Popular's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Popular's dividend payments per share have declined at 9.3% per year on average over the past 10 years, which is uninspiring.
To Sum It Up
Has Popular got what it takes to maintain its dividend payments? Earnings per share have been flat in recent years, although Popular reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Popular ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.