Banco de Chile (SNSE:CHILE) Has Announced That It Will Be Increasing Its Dividend To CLP8.58

The board of Banco de Chile (SNSE:CHILE) has announced that it will be paying its dividend of CLP8.58 on the 23rd of March, an increased payment from last year's comparable dividend. This will take the annual payment to 10.0% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Banco de Chile

Banco de Chile's Dividend Forecasted To Be Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Banco de Chile has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Banco de Chile's last earnings report, the payout ratio is at a decent 62%, meaning that the company is able to pay out its dividend with a bit of room to spare.

EPS is set to fall by 25.6% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 69% over the same time period, which we think the company can easily maintain.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of CLP2.56 in 2013 to the most recent total annual payment of CLP8.58. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Banco de Chile has grown earnings per share at 20% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Our Thoughts On Banco de Chile's Dividend

Overall, we always like to see the dividend being raised, but we don't think Banco de Chile will make a great income stock. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think Banco de Chile is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Banco de Chile you should be aware of, and 1 of them is a bit unpleasant. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.