Assessing the Dividend Sustainability of Localiza Rent A Car SA (LZRFY)
Deep Dive into the Dividend Performance of Brazil's Largest Car Rental Service Provider
Localiza Rent A Car SA (LZRFY) recently announced a dividend of $0.08 per share, payable on 2023-11-30, with the ex-dividend date set for 2023-10-04. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's deep dive into Localiza Rent A Car SA's dividend performance and assess its sustainability.
Overview of Localiza Rent A Car SA
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Localiza Rent A Car SA is a car rental service provider with the majority of its operations in Brazil. Through its subsidiaries, the company rents cars to individuals, manages corporate car fleets, sells its fleet to the general public, and offers a franchise model. Franchisees account for roughly half of Localize's car rental locations, while the majority of cars accessible with Localize are owned by the company. The fleet rental division has long-term agreements with companies that come up for renewal roughly every two to three years. The car rental segment delivers three-quarters of yearly revenue, and fleet rental makes up the rest, with an insignificant share contributed by the franchise management division.
Localiza Rent A Car SA's Dividend History
Localiza Rent A Car SA has maintained a consistent dividend payment record since 2012. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Understanding Localiza Rent A Car SA's Dividend Yield and Growth
As of today, Localiza Rent A Car SA currently has a 12-month trailing dividend yield of 2.54% and a 12-month forward dividend yield of 2.67%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Localiza Rent A Car SA's annual dividend growth rate was 49.40%. Extended to a five-year horizon, this rate decreased to 32.80% per year. And over the past decade, Localiza Rent A Car SA's annual dividends per share growth rate stands at an impressive 26.90%.
Based on Localiza Rent A Car SA's dividend yield and five-year growth rate, the 5-year yield on cost of Localiza Rent A Car SA stock as of today is approximately 10.49%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-06-30, Localiza Rent A Car SA's dividend payout ratio is 1.18. And this may suggest that the company's dividend may not be sustainable.
Localiza Rent A Car SA's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Localiza Rent A Car SA's profitability 9 out of 10 as of 2023-06-30, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Localiza Rent A Car SA's growth rank of 9 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Localiza Rent A Car SA's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Localiza Rent A Car SA's revenue has increased by approximately 14.60% per year on average, a rate that outperforms than approximately 76.8% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Localiza Rent A Car SA's earnings increased by approximately 24.00% per year on average, a rate that outperforms than approximately 66.37% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 28.40%, which outperforms than approximately 85.51% of global competitors.
Conclusion
Despite a high payout ratio, Localiza Rent A Car SA's strong profitability, robust growth metrics, and impressive dividend growth rate suggest potential for sustainable dividends in the future. However, investors should keep an eye on the payout ratio and the company's ability to maintain its earnings growth. With a solid growth trajectory and a high profitability rank, Localiza Rent A Car SA presents a compelling case for dividend investors.
GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article first appeared on GuruFocus.
