Empresas Tricot S.A. (SNSE:TRICOT) Will Pay A CL$8.7758641 Dividend In Four Days

Empresas Tricot S.A. (SNSE:TRICOT) is about to trade ex-dividend in the next four days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least 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 Empresas Tricot's shares before the 11th of September in order to receive the dividend, which the company will pay on the 16th of September.

The company's next dividend payment will be CL$8.7758641 per share. Last year, in total, the company distributed CL$20.60 to shareholders. Looking at the last 12 months of distributions, Empresas Tricot has a trailing yield of approximately 3.2% on its current stock price of CL$652.00. If you buy this business for its dividend, you should have an idea of whether Empresas Tricot's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

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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. Empresas Tricot paid out a comfortable 40% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out an unsustainably high 220% of its free cash flow as dividends over the past 12 months, which is worrying. It's pretty hard to pay out more than you earn, so we wonder how Empresas Tricot intends to continue funding this dividend, or if it could be forced to cut the payment.

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. Cash is king, as they say, and were Empresas Tricot to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Empresas Tricot's earnings per share have risen 13% per annum over the last 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. Empresas Tricot has delivered 5.3% dividend growth per year on average over the past eight years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

Is Empresas Tricot an attractive dividend stock, or better left on the shelf? We like that Empresas Tricot has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

So while Empresas Tricot looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Empresas Tricot has 1 warning sign we think you should be aware of.

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.