Companhia Energética do Rio Grande do Norte - COSERN (BVMF:CSRN3) Pays A R$0.30 Dividend In Just Three Days

Readers hoping to buy Companhia Energética do Rio Grande do Norte - COSERN (BVMF:CSRN3) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 7th of January in order to be eligible for this dividend, which will be paid on the 31st of December.

Companhia Energética do Rio Grande do Norte - COSERN's next dividend payment will be R$0.30 per share, and in the last 12 months, the company paid a total of R$1.15 per share. Last year's total dividend payments show that Companhia Energética do Rio Grande do Norte - COSERN has a trailing yield of 6.6% on the current share price of R$17.47. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Companhia Energética do Rio Grande do Norte - COSERN

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Its dividend payout ratio is 77% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline. A useful secondary check can be to evaluate whether Companhia Energética do Rio Grande do Norte - COSERN generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (78%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

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.

Click here to see how much of its profit Companhia Energética do Rio Grande do Norte - COSERN paid out over the last 12 months.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Companhia Energética do Rio Grande do Norte - COSERN's earnings per share have been growing at 10% a year for the past five years. It paid out more than three-quarters of its earnings in the last year, even though earnings per share are growing rapidly. Higher earnings generally bode well for growing dividends, although with seemingly strong growth prospects we'd wonder why management are not reinvesting more in the business.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Companhia Energética do Rio Grande do Norte - COSERN has delivered 1.9% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Companhia Energética do Rio Grande do Norte - COSERN is keeping back more of its profits to grow the business.

The Bottom Line

Is Companhia Energética do Rio Grande do Norte - COSERN an attractive dividend stock, or better left on the shelf? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that Companhia Energética do Rio Grande do Norte - COSERN is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

While it's tempting to invest in Companhia Energética do Rio Grande do Norte - COSERN for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for Companhia Energética do Rio Grande do Norte - COSERN you should know about.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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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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