Stock Analysis

Four Days Left Until Compañía Cervecerías Unidas S.A. (SNSE:CCU) Trades Ex-Dividend

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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Compañía Cervecerías Unidas S.A. (SNSE:CCU) is about to go ex-dividend in just four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Compañía Cervecerías Unidas' shares before the 25th of April to receive the dividend, which will be paid on the 30th of April.

The company's next dividend payment will be CL$85.06042 per share, and in the last 12 months, the company paid a total of CL$111 per share. Based on the last year's worth of payments, Compañía Cervecerías Unidas has a trailing yield of 1.9% on the current stock price of CL$5720.00. If you buy this business for its dividend, you should have an idea of whether Compañía Cervecerías Unidas's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Compañía Cervecerías Unidas

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. Compañía Cervecerías Unidas paid out a comfortable 35% of its profit last year. A useful secondary check can be to evaluate whether Compañía Cervecerías Unidas generated enough free cash flow to afford its dividend. Fortunately, it paid out only 40% of its free cash flow in the past year.

It's positive to see that Compañía Cervecerías Unidas's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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

SNSE:CCU Historic Dividend April 20th 2024

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by Compañía Cervecerías Unidas's 19% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Compañía Cervecerías Unidas has seen its dividend decline 4.7% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Final Takeaway

Is Compañía Cervecerías Unidas an attractive dividend stock, or better left on the shelf? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Compañía Cervecerías Unidas's dividend merits.

While it's tempting to invest in Compañía Cervecerías Unidas for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Compañía Cervecerías Unidas and understanding them should be part of your investment process.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Compañía Cervecerías Unidas is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.