Molibdenos y Metales S.A. (SNSE:MOLYMET) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Molibdenos y Metales S.A. (SNSE:MOLYMET) stock is about to trade ex-dividend in 4 days. The ex-dividend date is commonly two business days 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Therefore, if you purchase Molibdenos y Metales' shares on or after the 29th of April, you won't be eligible to receive the dividend, when it is paid on the 5th of May.

The company's next dividend payment will be US$0.25 per share, on the back of last year when the company paid a total of US$0.094 to shareholders. Looking at the last 12 months of distributions, Molibdenos y Metales has a trailing yield of approximately 2.3% on its current stock price of CL$3900.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. Molibdenos y Metales paid out a comfortable 36% of its profit last year. A useful secondary check can be to evaluate whether Molibdenos y Metales generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 34% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Molibdenos y Metales'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.

View our latest analysis for Molibdenos y Metales

Click here to see how much of its profit Molibdenos y Metales paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Molibdenos y Metales's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Earnings per share growth in recent times has not been a standout. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Molibdenos y Metales has seen its dividend decline 5.1% per annum on average over the past nine years, which is not great to see.

To Sum It Up

Has Molibdenos y Metales got what it takes to maintain its dividend payments? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. Generally we like to see both low payout ratios and strong earnings per share growth, but Molibdenos y Metales is halfway there. It's a promising combination that should mark this company worthy of closer attention.

So while Molibdenos y Metales looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 1 warning sign for Molibdenos y Metales that you should be aware of before investing in their shares.

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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.