Trajano Iberia Socimi, S.A. (BME:YTRA) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 30th of October to receive the dividend, which will be paid on the 1st of November.
The upcoming dividend for Trajano Iberia Socimi will put a total of €1.7 per share in shareholders' pockets, up from last year's total dividends of €0.6. 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 investigate whether Trajano Iberia Socimi can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Trajano Iberia Socimi paid out a comfortable 48% of its profit last year. While Trajano Iberia Socimi seems to be paying out a very high percentage of its income, REITs have different dividend payment behaviour and so, while we don't think this is great, we also don't think it is unusual. A useful secondary check can be to evaluate whether Trajano Iberia Socimi generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 48% of the free cash flow it generated, which is a comfortable payout ratio.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Trajano Iberia Socimi's earnings have been skyrocketing, up 120% per annum for the past five years. Trajano Iberia Socimi is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last four years, Trajano Iberia Socimi has lifted its dividend by approximately 107% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Is Trajano Iberia Socimi worth buying for its dividend? Trajano Iberia Socimi has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.
Keen to explore more data on Trajano Iberia Socimi's financial performance? Check out our visualisation of its historical revenue and earnings growth.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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