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

Readers hoping to buy SalfaCorp S.A. (SNSE:SALFACORP) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase SalfaCorp's shares before the 12th of May in order to receive the dividend, which the company will pay on the 15th of May.

The company's upcoming dividend is CL$23.48 a share, following on from the last 12 months, when the company distributed a total of CL$23.48 per share to shareholders. Based on the last year's worth of payments, SalfaCorp stock has a trailing yield of around 3.4% on the current share price of CL$695.00. If you buy this business for its dividend, you should have an idea of whether SalfaCorp's dividend is reliable and sustainable. As a result, readers should always check whether SalfaCorp has been able to grow its dividends, or if the dividend might be cut.

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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. That's why it's good to see SalfaCorp paying out a modest 30% of its earnings. A useful secondary check can be to evaluate whether SalfaCorp generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 37% of the free cash flow it generated, which is a comfortable payout ratio.

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.

View our latest analysis for SalfaCorp

Click here to see how much of its profit SalfaCorp 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see SalfaCorp earnings per share are up 8.7% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. SalfaCorp has delivered 3.5% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Has SalfaCorp got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and SalfaCorp is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but SalfaCorp is being conservative with its dividend payouts and could still perform reasonably over the long run. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks SalfaCorp is facing. For example, SalfaCorp has 2 warning signs (and 1 which is significant) we think you should know about.

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.