Is Bolsa de Comercio de Santiago, Bolsa de Valores's (SNSE:BOLSASTGO) 5.3% Dividend Sustainable?

Dividend paying stocks like Bolsa de Comercio de Santiago, Bolsa de Valores (SNSE:BOLSASTGO) tend to be popular with investors, and for good reason - some research suggests a significant amount of all stock market returns come from reinvested dividends. Unfortunately, it's common for investors to be enticed in by the seemingly attractive yield, and lose money when the company has to cut its dividend payments.

A high yield and a long history of paying dividends is an appealing combination for Bolsa de Comercio de Santiago Bolsa de Valores. It would not be a surprise to discover that many investors buy it for the dividends. There are a few simple ways to reduce the risks of buying Bolsa de Comercio de Santiago Bolsa de Valores for its dividend, and we'll go through these below.

Explore this interactive chart for our latest analysis on Bolsa de Comercio de Santiago Bolsa de Valores!

Payout ratios

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. As a result, we should always investigate whether a company can afford its dividend, measured as a percentage of a company's net income after tax. Looking at the data, we can see that 56% of Bolsa de Comercio de Santiago Bolsa de Valores' profits were paid out as dividends in the last 12 months. This is a healthy payout ratio, and while it does limit the amount of earnings that can be reinvested in the business, there is also some room to lift the payout ratio over time.

Consider getting our latest analysis on Bolsa de Comercio de Santiago Bolsa de Valores' financial position here.

Dividend Volatility

From the perspective of an income investor who wants to earn dividends for many years, there is not much point buying a stock if its dividend is regularly cut or is not reliable. For the purpose of this article, we only scrutinise the last decade of Bolsa de Comercio de Santiago Bolsa de Valores' dividend payments. This dividend has been unstable, which we define as having been cut one or more times over this time. During the past 10-year period, the first annual payment was CL$68.0 in 2010, compared to CL$119 last year. This works out to be a compound annual growth rate (CAGR) of approximately 5.8% a year over that time. Bolsa de Comercio de Santiago Bolsa de Valores' dividend payments have fluctuated, so it hasn't grown 5.8% every year, but the CAGR is a useful rule of thumb for approximating the historical growth.

Dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Dividend Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Bolsa de Comercio de Santiago Bolsa de Valores' EPS have fallen by approximately 13% per year during the past three years. A sharp decline in earnings per share is not great from from a dividend perspective, as even conservative payout ratios can come under pressure if earnings fall far enough.

Conclusion

Dividend investors should always want to know if a) a company's dividends are affordable, b) if there is a track record of consistent payments, and c) if the dividend is capable of growing. Bolsa de Comercio de Santiago Bolsa de Valores' payout ratio is within an average range for most market participants. Earnings per share have been falling, and the company has cut its dividend at least once in the past. From a dividend perspective, this is a cause for concern. With this information in mind, we think Bolsa de Comercio de Santiago Bolsa de Valores may not be an ideal dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Bolsa de Comercio de Santiago Bolsa de Valores (of which 1 doesn't sit too well with us!) you should know about.

Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.

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This article by Simply Wall St is general in nature. 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.
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