Income Investors Should Know That Compañía Industrial El Volcán S.A. (SNSE:VOLCAN) Goes Ex-Dividend Soon

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 Compañía Industrial El Volcán S.A. (SNSE:VOLCAN) is about to go ex-dividend in just four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. Thus, you can purchase Compañía Industrial El Volcán's shares before the 10th of January in order to receive the dividend, which the company will pay on the 15th of January.

The company's next dividend payment will be CL$30.00 per share. Last year, in total, the company distributed CL$90.00 to shareholders. Looking at the last 12 months of distributions, Compañía Industrial El Volcán has a trailing yield of approximately 3.6% on its current stock price of CL$2502.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Compañía Industrial El Volcán has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Compañía Industrial El Volcán

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. Compañía Industrial El Volcán is paying out just 13% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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 77% 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.

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 with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Compañía Industrial El Volcán's earnings per share have remained 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 high payout ratio of 13% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, Compañía Industrial El Volcán could be signalling that its future growth prospects are thin.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the Compañía Industrial El Volcán dividends are largely the same as they were 10 years ago.

The Bottom Line

Is Compañía Industrial El Volcán worth buying for its dividend? Earnings per share have been flat over the 10-year timeframe we consider, and Compañía Industrial El Volcán paid out less than half its earnings and more than half its free cashflow over the last year. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

While it's tempting to invest in Compañía Industrial El Volcán for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 2 warning signs for Compañía Industrial El Volcán (1 is a bit unpleasant) you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.