Zona Franca de Iquique (SNSE:ZOFRI) Has Announced A Dividend Of CLP33.56

Zona Franca de Iquique S.A. (SNSE:ZOFRI) has announced that it will pay a dividend of CLP33.56 per share on the 28th of November. This means the annual payment is 7.0% of the current stock price, which is above the average for the industry.

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Zona Franca de Iquique's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Zona Franca de Iquique's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 150% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

EPS is set to grow by 9.1% over the next year if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 79%, which is on the higher side, but certainly still feasible.

See our latest analysis for Zona Franca de Iquique

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was CLP35.16, compared to the most recent full-year payment of CLP67.12. This means that it has been growing its distributions at 6.7% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Zona Franca de Iquique Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Zona Franca de Iquique has seen EPS rising for the last five years, at 9.1% per annum. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Zona Franca de Iquique's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. Strong earnings growth means Zona Franca de Iquique has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We don't think Zona Franca de Iquique is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Zona Franca de Iquique has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of 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.