Quilicura's (SNSE:QUILICURA) Dividend Will Be Reduced To CLP19.00

Quilicura S.A.'s (SNSE:QUILICURA) dividend is being reduced by 65% to CLP19.00 per share on 20th of May, in comparison to last year's comparable payment of CLP54.00. This means the annual payment is 4.9% of the current stock price, which is above the average for the industry.

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Quilicura Might Find It Hard To Continue The Dividend

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Quilicura's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

If the trend of the last few years continues, EPS will grow by 5.3% over the next 12 months. This is the right direction to be moving, but it is probably not enough to achieve profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.

Check out our latest analysis for Quilicura

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of CLP6.90 in 2015 to the most recent total annual payment of CLP54.00. This means that it has been growing its distributions at 23% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

We Could See Quilicura's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Quilicura has seen EPS rising for the last five years, at 5.3% per annum. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Quilicura's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Quilicura that investors should take into consideration. 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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