Echeverría Izquierdo (SNSE:EISA) Is Increasing Its Dividend To CLP12.57

Echeverría Izquierdo S.A.'s (SNSE:EISA) periodic dividend will be increasing on the 23rd of May to CLP12.57, with investors receiving 41% more than last year's CLP8.89. This will take the dividend yield to an attractive 5.2%, providing a nice boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Echeverría Izquierdo's stock price has increased by 45% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

We've discovered 3 warning signs about Echeverría Izquierdo. View them for free.

Echeverría Izquierdo's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Echeverría Izquierdo's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 14.0% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 43% by next year, which is in a pretty sustainable range.

See our latest analysis for Echeverría Izquierdo

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was CLP1.61 in 2015, and the most recent fiscal year payment was CLP14.82. This works out to be a compound annual growth rate (CAGR) of approximately 25% a year over that time. Echeverría Izquierdo has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Echeverría Izquierdo has seen EPS rising for the last five years, at 14% per annum. Echeverría Izquierdo definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Echeverría Izquierdo Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Echeverría Izquierdo (of which 1 is a bit unpleasant!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.