Zona Franca de Iquique S.A. (SNSE:ZOFRI) Passed Our Checks, And It's About To Pay A CL$21.83 Dividend

By
Simply Wall St
Published
May 18, 2022
SNSE:ZOFRI
Source: Shutterstock

Zona Franca de Iquique S.A. (SNSE:ZOFRI) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. Thus, you can purchase Zona Franca de Iquique's shares before the 23rd of May in order to receive the dividend, which the company will pay on the 27th of May.

The company's next dividend payment will be CL$21.83 per share. Last year, in total, the company distributed CL$36.38 to shareholders. Based on the last year's worth of payments, Zona Franca de Iquique stock has a trailing yield of around 8.7% on the current share price of CLP420.1. If you buy this business for its dividend, you should have an idea of whether Zona Franca de Iquique's dividend is reliable and sustainable. As a result, readers should always check whether Zona Franca de Iquique has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Zona Franca de Iquique

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Zona Franca de Iquique's payout ratio is modest, at just 50% of profit. A useful secondary check can be to evaluate whether Zona Franca de Iquique generated enough free cash flow to afford its dividend. The good news is it paid out just 22% of its free cash flow in the last year.

It's positive to see that Zona Franca de Iquique's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Zona Franca de Iquique paid out over the last 12 months.

historic-dividend
SNSE:ZOFRI Historic Dividend May 18th 2022

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Zona Franca de Iquique earnings per share are up 9.2% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Zona Franca de Iquique's dividend payments are broadly unchanged compared to where they were 10 years ago.

To Sum It Up

Is Zona Franca de Iquique an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Zona Franca de Iquique is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Zona Franca de Iquique is halfway there. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Zona Franca de Iquique is facing. For example, Zona Franca de Iquique has 3 warning signs (and 1 which is concerning) we think you should know about.

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

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