Viña San Pedro Tarapacá's (SNSE:VSPT) Upcoming Dividend Will Be Larger Than Last Year's

Viña San Pedro Tarapacá S.A. (SNSE:VSPT) has announced that it will be increasing its periodic dividend on the 30th of April to CLP0.2402, which will be 35% higher than last year's comparable payment amount of CLP0.178. This makes the dividend yield about the same as the industry average at 4.5%.

See our latest analysis for Viña San Pedro Tarapacá

Viña San Pedro Tarapacá's Future Dividend Projections Appear Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, Viña San Pedro Tarapacá's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Unless the company can turn things around, EPS could fall by 2.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 51%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was CLP0.137, compared to the most recent full-year payment of CLP0.178. This works out to be a compound annual growth rate (CAGR) of approximately 2.7% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Viña San Pedro Tarapacá has seen earnings per share falling at 2.9% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Viña San Pedro Tarapacá's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Viña San Pedro Tarapacá (of which 1 shouldn't be ignored!) you should know about. Is Viña San Pedro Tarapacá not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.