Soquimich Comercial S.A. (SNSE:SOQUICOM) Stock Goes Ex-Dividend In Just Four Days

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 Soquimich Comercial S.A. (SNSE:SOQUICOM) is about to go ex-dividend in just 4 days. Ex-dividend means that investors that purchase the stock on or after the 16th of December will not receive this dividend, which will be paid on the 21st of December.

Soquimich Comercial's next dividend payment will be US$0.037 per share, which looks like a nice increase on last year, when the company distributed a total of US$0.019 to shareholders. 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 investigate whether Soquimich Comercial can afford its dividend, and if the dividend could grow.

See our latest analysis for Soquimich Comercial

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. Soquimich Comercial paid out more than half (65%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Soquimich Comercial generated enough free cash flow to afford its dividend. It paid out 0.3% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Soquimich Comercial'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 Soquimich Comercial paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by Soquimich Comercial's 8.1% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Soquimich Comercial has lifted its dividend by approximately 1.9% a year on average.

To Sum It Up

Should investors buy Soquimich Comercial for the upcoming dividend? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. All things considered, we are not particularly enthused about Soquimich Comercial from a dividend perspective.

However if you're still interested in Soquimich Comercial as a potential investment, you should definitely consider some of the risks involved with Soquimich Comercial. To help with this, we've discovered 3 warning signs for Soquimich Comercial (1 doesn't sit too well with us!) that you ought to be aware of before buying the shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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