There's A Lot To Like About Cencosud Shopping's (SNSE:CENCOSHOPP) Upcoming CL$70.00 Dividend

Cencosud Shopping S.A. (SNSE:CENCOSHOPP) stock is about to trade ex-dividend in 3 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. Thus, you can purchase Cencosud Shopping's shares before the 13th of November in order to receive the dividend, which the company will pay on the 16th of November.

The company's next dividend payment will be CL$70.00 per share, on the back of last year when the company paid a total of CL$110 to shareholders. Based on the last year's worth of payments, Cencosud Shopping has a trailing yield of 8.0% on the current stock price of CLP1369.7. 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 Cencosud Shopping

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Cencosud Shopping is paying out just 21% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 63% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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 the company's payout ratio, plus analyst estimates of its future dividends.

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. That's why it's comforting to see Cencosud Shopping's earnings have been skyrocketing, up 31% per annum for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Cencosud Shopping has delivered 52% dividend growth per year on average over the past four years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Is Cencosud Shopping worth buying for its dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Cencosud Shopping looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Cencosud Shopping for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for Cencosud Shopping you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.