Is It Smart To Buy Empresas Copec S.A. (SNSE:COPEC) Before It Goes Ex-Dividend?

It looks like Empresas Copec S.A. (SNSE:COPEC) is about to go ex-dividend in the next four days. The ex-dividend date is commonly two business days 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Thus, you can purchase Empresas Copec's shares before the 5th of May in order to receive the dividend, which the company will pay on the 8th of May.

The company's upcoming dividend is US$0.16949 a share, following on from the last 12 months, when the company distributed a total of US$0.23 per share to shareholders. Calculating the last year's worth of payments shows that Empresas Copec has a trailing yield of 3.4% on the current share price of CL$6500.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Empresas Copec can afford its dividend, and if the dividend could grow.

Our free stock report includes 3 warning signs investors should be aware of before investing in Empresas Copec. Read for free now.

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. Empresas Copec paid out a comfortable 29% of its profit last year.

Check out our latest analysis for Empresas Copec

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Empresas Copec has grown its earnings rapidly, up 46% a year for the past five years. Empresas Copec is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Empresas Copec has seen its dividend decline 0.8% per annum on average over the past 10 years, which is not great to see.

To Sum It Up

Has Empresas Copec got what it takes to maintain its dividend payments? Companies like Empresas Copec that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Empresas Copec ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

In light of that, while Empresas Copec has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 3 warning signs with Empresas Copec (at least 1 which is potentially serious), and understanding these should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.