Compañía Cervecerías Unidas (SNSE:CCU) Is Due To Pay A Dividend Of CLP85.06

The board of Compañía Cervecerías Unidas S.A. (SNSE:CCU) has announced that it will pay a dividend on the 30th of April, with investors receiving CLP85.06 per share. Even though the dividend went up, the yield is still quite low at only 1.9%.

View our latest analysis for Compañía Cervecerías Unidas

Compañía Cervecerías Unidas' Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Compañía Cervecerías Unidas' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 79.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of CLP179.65 in 2014 to the most recent total annual payment of CLP111.3. The dividend has shrunk at around 4.7% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

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. Earnings per share has been sinking by 19% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. 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.

Our Thoughts On Compañía Cervecerías Unidas' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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. Is Compañía Cervecerías Unidas not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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