Empresas Tricot S.A. (SNSE:TRICOT) Stock Goes Ex-Dividend In Just Four Days

Readers hoping to buy Empresas Tricot S.A. (SNSE:TRICOT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. Therefore, if you purchase Empresas Tricot's shares on or after the 11th of December, you won't be eligible to receive the dividend, when it is paid on the 16th of December.

The company's next dividend payment will be CL$1.1497208 per share, and in the last 12 months, the company paid a total of CL$24.21 per share. Looking at the last 12 months of distributions, Empresas Tricot has a trailing yield of approximately 3.7% on its current stock price of CL$655.00. 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.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Empresas Tricot paid out more than half (58%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Empresas Tricot generated enough free cash flow to afford its dividend. The company paid out 98% of its free cash flow over the last year, which we think is outside the ideal range 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.

While Empresas Tricot's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Empresas Tricot's ability to maintain its dividend.

Check out our latest analysis for Empresas Tricot

Click here to see how much of its profit Empresas Tricot paid out over the last 12 months.

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. Fortunately for readers, Empresas Tricot's earnings per share have been growing at 13% a year for the past five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past eight years, Empresas Tricot has increased its dividend at approximately 7.4% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Has Empresas Tricot got what it takes to maintain its dividend payments? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note Empresas Tricot paid out a much higher percentage of its free cash flow, which makes us uncomfortable. To summarise, Empresas Tricot looks okay on this analysis, although it doesn't appear a stand-out opportunity.

However if you're still interested in Empresas Tricot as a potential investment, you should definitely consider some of the risks involved with Empresas Tricot. In terms of investment risks, we've identified 1 warning sign with Empresas Tricot and understanding them should be part of your investment process.

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.