Be Sure To Check Out Compañía Industrial El Volcán S.A. (SNSE:VOLCAN) Before It Goes Ex-Dividend

It looks like Compañía Industrial El Volcán S.A. (SNSE:VOLCAN) is about to go ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Compañía Industrial El Volcán's shares on or after the 10th of May will not receive the dividend, which will be paid on the 15th of May.

The company's next dividend payment will be CL$30.00 per share, on the back of last year when the company paid a total of CL$134 to shareholders. Based on the last year's worth of payments, Compañía Industrial El Volcán has a trailing yield of 5.5% on the current stock price of CL$2430.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Compañía Industrial El Volcán

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Compañía Industrial El Volcán's payout ratio is modest, at just 45% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 41% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Compañía Industrial El Volcán paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Compañía Industrial El Volcán, with earnings per share up 2.6% on average over the last five years. Earnings per share growth in recent times has not been a standout. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Compañía Industrial El Volcán has delivered 3.8% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Has Compañía Industrial El Volcán got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and Compañía Industrial El Volcán is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Compañía Industrial El Volcán is halfway there. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Compañía Industrial El Volcán is facing. Every company has risks, and we've spotted 2 warning signs for Compañía Industrial El Volcán 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.

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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.