Compañía Industrial El Volcán S.A. (SNSE:VOLCAN) Pays A CL$40.00 Dividend In Just Four Days

Readers hoping to buy Compañía Industrial El Volcán S.A. (SNSE:VOLCAN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Compañía Industrial El Volcán's shares on or after the 11th of September, you won't be eligible to receive the dividend, when it is paid on the 16th of September.

The company's next dividend payment will be CL$40.00 per share, and in the last 12 months, the company paid a total of CL$128 per share. Based on the last year's worth of payments, Compañía Industrial El Volcán has a trailing yield of 3.9% on the current stock price of CL$3300.00. 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 out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Compañía Industrial El Volcán paid out a comfortable 42% of its profit last year. A useful secondary check can be to evaluate whether Compañía Industrial El Volcán generated enough free cash flow to afford its dividend. It paid out 86% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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.

See our latest analysis for Compañía Industrial El Volcán

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?

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Compañía Industrial El Volcán's earnings are 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. A payout ratio of 42% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.

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 an average of 4.6% per year annual increase in its dividend, based on the past 10 years of dividend payments.

To Sum It Up

From a dividend perspective, should investors buy or avoid Compañía Industrial El Volcán? Compañía Industrial El Volcán has struggled to grow earnings per share, and it's paying out less than half of its earnings and more than half its cash flow to shareholders as dividends. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

On that note, you'll want to research what risks Compañía Industrial El Volcán is facing. Every company has risks, and we've spotted 3 warning signs for Compañía Industrial El Volcán (of which 1 is significant!) you should know about.

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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.