Stock Analysis

It Might Not Be A Great Idea To Buy Viña San Pedro Tarapacá S.A. (SNSE:VSPT) For Its Next Dividend

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It looks like Viña San Pedro Tarapacá S.A. (SNSE:VSPT) is about to go ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Viña San Pedro Tarapacá investors that purchase the stock on or after the 25th of April will not receive the dividend, which will be paid on the 30th of April.

The company's next dividend payment will be CL$0.17838 per share. Last year, in total, the company distributed CL$0.18 to shareholders. Based on the last year's worth of payments, Viña San Pedro Tarapacá stock has a trailing yield of around 3.2% on the current share price of CL$5.528. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Viña San Pedro Tarapacá

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. Viña San Pedro Tarapacá paid out 50% of its earnings to investors last year, a normal payout level for most businesses. 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. Viña San Pedro Tarapacá paid out more free cash flow than it generated - 147%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

While Viña San Pedro Tarapacá's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Viña San Pedro Tarapacá's ability to maintain its dividend.

Click here to see how much of its profit Viña San Pedro Tarapacá paid out over the last 12 months.

SNSE:VSPT Historic Dividend April 20th 2024

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Viña San Pedro Tarapacá's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Viña San Pedro Tarapacá has lifted its dividend by approximately 6.5% a year on average.

To Sum It Up

From a dividend perspective, should investors buy or avoid Viña San Pedro Tarapacá? Earnings per share have not grown and Viña San Pedro Tarapacá's profit payout ratio looks reasonable. However, it paid out a disconcertingly high percentage of its cashflow, which is a worry. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Viña San Pedro Tarapacá.

With that in mind though, if the poor dividend characteristics of Viña San Pedro Tarapacá don't faze you, it's worth being mindful of the risks involved with this business. Every company has risks, and we've spotted 1 warning sign for Viña San Pedro Tarapacá you should know about.

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 Viña San Pedro Tarapacá 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.