Compañía Cervecerías Unidas' (SNSE:CCU) Upcoming Dividend Will Be Larger Than Last Year's

The board of Compañía Cervecerías Unidas S.A. (SNSE:CCU) has announced that it will be increasing its dividend by 36% on the 28th of November to CLP117.50, up from last year's comparable payment of CLP86.5. The payment will take the dividend yield to 3.2%, which is in line with the average for the industry.

View our latest analysis for Compañía Cervecerías Unidas

Compañía Cervecerías Unidas' Future Dividend Projections Appear Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Compañía Cervecerías Unidas was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Looking forward, earnings per share is forecast to rise by 38.9% over the next year. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from CLP166.49 total annually to CLP171.56. Its dividends have grown at less than 1% per annum over this time frame. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Unfortunately, Compañía Cervecerías Unidas' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Compañía Cervecerías Unidas' Dividend

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 company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Compañía Cervecerías Unidas has 2 warning signs (and 1 which is potentially serious) we think you should know about. 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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