Viña Concha y Toro S.A. (SNSE:CONCHATORO) Passed Our Checks, And It's About To Pay A CL$5.00 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Viña Concha y Toro S.A. (SNSE:CONCHATORO) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Viña Concha y Toro's shares before the 23rd of December in order to receive the dividend, which the company will pay on the 29th of December.

The company's next dividend payment will be CL$5.00 per share, on the back of last year when the company paid a total of CL$41.90 to shareholders. Calculating the last year's worth of payments shows that Viña Concha y Toro has a trailing yield of 4.1% on the current share price of CL$1020.00. If you buy this business for its dividend, you should have an idea of whether Viña Concha y Toro's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

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. That's why it's good to see Viña Concha y Toro paying out a modest 41% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out more than half (69%) of its free cash flow in the past year, which is within an average range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

View our latest analysis for Viña Concha y Toro

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Viña Concha y Toro earnings per share are up 8.5% per annum over the last five years. Decent historical earnings per share growth suggests Viña Concha y Toro has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Viña Concha y Toro has increased its dividend at approximately 5.7% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid Viña Concha y Toro? Earnings per share growth has been modest, and it's interesting that Viña Concha y Toro is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Viña Concha y Toro's dividend merits.

So while Viña Concha y Toro looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Viña Concha y Toro has 2 warning signs we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.