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

Forus S.A. (SNSE:FORUS) is about to trade ex-dividend in the next three days. 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. Therefore, if you purchase Forus' shares on or after the 17th of November, you won't be eligible to receive the dividend, when it is paid on the 21st of November.

The company's next dividend payment will be CL$15.50 per share, on the back of last year when the company paid a total of CL$35.13 to shareholders. Looking at the last 12 months of distributions, Forus has a trailing yield of approximately 1.6% on its current stock price of CL$2185.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Forus paid out just 18% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 25% of its free cash flow in the past year.

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 Forus

Click here to see how much of its profit Forus paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Forus, with earnings per share up 3.9% on average over the last five years. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Forus's dividend payments per share have declined at 4.7% per year on average over the past 10 years, which is uninspiring. Forus is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

From a dividend perspective, should investors buy or avoid Forus? Earnings per share have been growing moderately, and Forus is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Forus is being conservative with its dividend payouts and could still perform reasonably over the long run. Forus looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Want to learn more about Forus's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.