Four Days Left Until Empresas Tricot S.A. (SNSE:TRICOT) Trades Ex-Dividend

Empresas Tricot S.A. (SNSE:TRICOT) stock is about to trade ex-dividend in four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Empresas Tricot investors that purchase the stock on or after the 5th of September will not receive the dividend, which will be paid on the 10th of September.

The company's upcoming dividend is CL$6.6843395 a share, following on from the last 12 months, when the company distributed a total of CL$14.95 per share to shareholders. Last year's total dividend payments show that Empresas Tricot has a trailing yield of 3.1% on the current share price of CL$487.94. 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 Tricot can afford its dividend, and if the dividend could grow.

See our latest analysis for Empresas Tricot

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. That's why it's good to see Empresas Tricot paying out a modest 35% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 30% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Empresas Tricot has delivered an average of 1.3% per year annual increase in its dividend, based on the past seven years of dividend payments.

To Sum It Up

From a dividend perspective, should investors buy or avoid Empresas Tricot? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

Curious about whether Empresas Tricot has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.

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.