Empresas Tricot S.A. (SNSE:TRICOT) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

It looks like Empresas Tricot S.A. (SNSE:TRICOT) is about to go ex-dividend in the next three 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Empresas Tricot investors that purchase the stock on or after the 12th of December will not receive the dividend, which will be paid on the 17th of December.

The company's next dividend payment will be CL$0.9758122 per share, on the back of last year when the company paid a total of CL$14.95 to shareholders. Based on the last year's worth of payments, Empresas Tricot stock has a trailing yield of around 3.5% on the current share price of CL$430.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Empresas Tricot has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Empresas Tricot

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. That's why it's good to see Empresas Tricot paying out a modest 35% of its earnings. A useful secondary check can be to evaluate whether Empresas Tricot generated enough free cash flow to afford its dividend. It distributed 36% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Empresas Tricot'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 Empresas Tricot paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Empresas Tricot's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, seven years ago, Empresas Tricot has lifted its dividend by approximately 1.3% a year on average.

Final Takeaway

Is Empresas Tricot an attractive dividend stock, or better left on the shelf? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. Generally we like to see both low payout ratios and strong earnings per share growth, but Empresas Tricot is halfway there. Empresas Tricot looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Empresas Tricot has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for Empresas Tricot and you should be aware of it before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.