Compañía Cervecerías Unidas' (SNSE:CCU) Dividend Will Be CLP85.06

Compañía Cervecerías Unidas S.A. (SNSE:CCU) has announced that it will pay a dividend of CLP85.06 per share on the 30th of April. This takes the annual payment to 1.9% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Compañía Cervecerías Unidas

Compañía Cervecerías Unidas' Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Compañía Cervecerías Unidas' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 94.3%. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of CLP179.65 in 2014 to the most recent total annual payment of CLP111.3. Doing the maths, this is a decline of about 4.7% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Compañía Cervecerías Unidas' EPS has fallen by approximately 19% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Compañía Cervecerías Unidas' payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Compañía Cervecerías Unidas is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Compañía Cervecerías Unidas that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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