Why You Might Be Interested In Feria de Osorno S.A. (SNSE:FERIAOSOR) For Its Upcoming Dividend

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 Feria de Osorno S.A. (SNSE:FERIAOSOR) is about to go ex-dividend in just four days. This means that investors who purchase shares on or after the 25th of November will not receive the dividend, which will be paid on the 30th of November.

Feria de Osorno's next dividend payment will be CL$3.00 per share. Last year, in total, the company distributed CL$8.00 to shareholders. Based on the last year's worth of payments, Feria de Osorno stock has a trailing yield of around 4.6% on the current share price of CLP173.82. If you buy this business for its dividend, you should have an idea of whether Feria de Osorno's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Feria de Osorno

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Feria de Osorno has a low and conservative payout ratio of just 18% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 22% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Feria de Osorno'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 how much of its profit Feria de Osorno paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Feria de Osorno has grown its earnings rapidly, up 44% a year for the past five years. Feria de Osorno earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Feria de Osorno has delivered 41% dividend growth per year on average over the past two years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Is Feria de Osorno worth buying for its dividend? Feria de Osorno has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Feria de Osorno looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Feria de Osorno has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Feria de Osorno that we recommend you consider before investing in the business.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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