We Wouldn't Be Too Quick To Buy Empresas Copec S.A. (SNSE:COPEC) Before It Goes Ex-Dividend

It looks like Empresas Copec S.A. (SNSE:COPEC) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Empresas Copec investors that purchase the stock on or after the 6th of May will not receive the dividend, which will be paid on the 9th of May.

The company's next dividend payment will be US$0.0965 per share, on the back of last year when the company paid a total of US$0.14 to shareholders. Calculating the last year's worth of payments shows that Empresas Copec has a trailing yield of 1.9% on the current share price of CL$6851.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Empresas Copec

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. Empresas Copec is paying out an acceptable 68% of its profit, a common payout level among most companies.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Empresas Copec's earnings per share have fallen at approximately 25% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Empresas Copec's dividend payments are effectively flat on where they were 10 years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.

The Bottom Line

Is Empresas Copec worth buying for its dividend? We're not overly enthused to see Empresas Copec's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. It doesn't appear an outstanding opportunity, but could be worth a closer look.

If you're not too concerned about Empresas Copec's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Our analysis shows 4 warning signs for Empresas Copec that we strongly recommend you have a look at before investing in the company.

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.