Only Three Days Left To Cash In On Inversiones Covadonga's (SNSE:COVADONGA) Dividend

It looks like Inversiones Covadonga S.A. (SNSE:COVADONGA) is about to go ex-dividend in the next three days. If you purchase the stock on or after the 11th of January, you won't be eligible to receive this dividend, when it is paid on the 14th of January.

Inversiones Covadonga's next dividend payment will be CL$5.00 per share. Last year, in total, the company distributed CL$26.93 to shareholders. Last year's total dividend payments show that Inversiones Covadonga has a trailing yield of 7.7% on the current share price of CLP350. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Inversiones Covadonga

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Inversiones Covadonga paying out a modest 31% of its earnings.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Inversiones Covadonga's earnings per share have dropped 22% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Inversiones Covadonga has increased its dividend at approximately 6.2% a year on average.

The Bottom Line

Is Inversiones Covadonga worth buying for its dividend? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. We're unconvinced on the company's merits, and think there might be better opportunities out there.

With that being said, if dividends aren't your biggest concern with Inversiones Covadonga, you should know about the other risks facing this business. For example, we've found 4 warning signs for Inversiones Covadonga (2 are a bit concerning!) that deserve your attention before investing in the shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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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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