We Wouldn't Be Too Quick To Buy Inversiones Unión Española S.A. (SNSE:INVIESPA) Before It Goes Ex-Dividend

Readers hoping to buy Inversiones Unión Española S.A. (SNSE:INVIESPA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 Unión Española's upcoming dividend is CL$31.00 a share, following on from the last 12 months, when the company distributed a total of CL$122 per share to shareholders. Based on the last year's worth of payments, Inversiones Unión Española stock has a trailing yield of around 8.4% on the current share price of CLP1458. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Inversiones Unión Española can afford its dividend, and if the dividend could grow.

See our latest analysis for Inversiones Unión Española

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Inversiones Unión Española is paying out an acceptable 72% of its profit, a common payout level among most companies.

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 Unión Española paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Inversiones Unión Española's earnings per share have fallen at approximately 16% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Inversiones Unión Española has lifted its dividend by approximately 10% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

To Sum It Up

Is Inversiones Unión Española worth buying for its dividend? We're not overly enthused to see Inversiones Unión Española's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

So if you're still interested in Inversiones Unión Española despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Our analysis shows 4 warning signs for Inversiones Unión Española that we strongly recommend you have a look at before investing in the company.

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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