Inversiones Unespa S.A. (SNSE:UNESPA) Is About To Go Ex-Dividend, And It Pays A 9.6% Yield

Inversiones Unespa S.A. (SNSE:UNESPA) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day 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 as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Inversiones Unespa investors that purchase the stock on or after the 11th of September will not receive the dividend, which will be paid on the 16th of September.

The company's next dividend payment will be CL$5.00 per share, and in the last 12 months, the company paid a total of CL$36.89 per share. Looking at the last 12 months of distributions, Inversiones Unespa has a trailing yield of approximately 9.6% on its current stock price of CL$386.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Inversiones Unespa

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. Its dividend payout ratio is 89% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The company paid out 107% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

Inversiones Unespa paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Inversiones Unespa's ability to maintain its dividend.

Click here to see how much of its profit Inversiones Unespa paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Inversiones Unespa's earnings per share have risen 13% per annum over the last five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Inversiones Unespa has delivered 3.0% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Inversiones Unespa is keeping back more of its profits to grow the business.

To Sum It Up

Is Inversiones Unespa worth buying for its dividend? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note Inversiones Unespa paid out a much higher percentage of its free cash flow, which makes us uncomfortable. In summary, it's hard to get excited about Inversiones Unespa from a dividend perspective.

If you want to look further into Inversiones Unespa, it's worth knowing the risks this business faces. For example, Inversiones Unespa has 3 warning signs (and 2 which can't be ignored) we think 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.