Be Sure To Check Out Besalco S.A. (SNSE:BESALCO) Before It Goes Ex-Dividend

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 Besalco S.A. (SNSE:BESALCO) is about to go ex-dividend in just 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Besalco's shares on or after the 25th of November, you won't be eligible to receive the dividend, when it is paid on the 28th of November.

The company's upcoming dividend is CL$6.00 a share, following on from the last 12 months, when the company distributed a total of CL$26.00 per share to shareholders. Last year's total dividend payments show that Besalco has a trailing yield of 4.5% on the current share price of CL$575.96. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Besalco

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. Besalco has a low and conservative payout ratio of just 20% of its income after tax. A useful secondary check can be to evaluate whether Besalco generated enough free cash flow to afford its dividend. It paid out more than half (70%) of its free cash flow in the past year, which is within an average range for most companies.

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 Besalco paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Besalco has grown its earnings rapidly, up 23% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Besalco has increased its dividend at approximately 10% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Should investors buy Besalco for the upcoming dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Besalco looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Besalco looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 2 warning signs for Besalco that we strongly recommend you have a look at before investing in the company.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.