Inversiones Unespa S.A. (SNSE:UNESPA) Will Pay A CL$5.00 Dividend In Four Days

Inversiones Unespa S.A. (SNSE:UNESPA) is about to trade ex-dividend in the next 4 days. The ex-dividend date generally occurs two days 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Inversiones Unespa's shares before the 12th of September to receive the dividend, which will be paid on the 17th of September.

The company's next dividend payment will be CL$5.00 per share. Last year, in total, the company distributed CL$29.10 to shareholders. Looking at the last 12 months of distributions, Inversiones Unespa has a trailing yield of approximately 7.5% on its current stock price of CL$386.00. If you buy this business for its dividend, you should have an idea of whether Inversiones Unespa's dividend is reliable and sustainable. As a result, readers should always check whether Inversiones Unespa has been able to grow its dividends, or if the dividend might be cut.

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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. Last year, Inversiones Unespa paid out 94% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. 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. It paid out 93% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

Cash is slightly more important than profit from a dividend perspective, but given Inversiones Unespa's payments were not well covered by either earnings or cash flow, we are concerned about the sustainability of this dividend.

Check out our latest analysis for Inversiones Unespa

Click here to see how much of its profit Inversiones Unespa 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Inversiones Unespa's earnings per share have risen 11% per annum over the last five years. It's not encouraging to see Inversiones Unespa paying out basically all of its earnings and cashflow to shareholders. We're glad that earnings are growing rapidly, but we're wary of the company stretching itself financially.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Inversiones Unespa has seen its dividend decline 1.9% per annum on average over the past 10 years, which is not great to see.

To Sum It Up

Is Inversiones Unespa an attractive dividend stock, or better left on the shelf? Earnings per share have been growing, despite the company paying out a concerningly high percentage of its earnings and cashflow. We struggle to see how a company paying out so much of its earnings and cash flow will be able to sustain its dividend in a downturn, or reinvest enough into its business to continue growing earnings without borrowing heavily. Bottom line: Inversiones Unespa has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

With that being said, if you're still considering Inversiones Unespa as an investment, you'll find it beneficial to know what risks this stock is facing. For instance, we've identified 3 warning signs for Inversiones Unespa (2 are a bit concerning) 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.