Energía de Casablanca (SNSE:CASABLANCA) Is Paying Out A Larger Dividend Than Last Year

The board of Energía de Casablanca S.A. (SNSE:CASABLANCA) has announced that the dividend on 27th of May will be increased to CL$98.00, which will be 63% higher than last year. This will take the annual payment from 5.7% to 9.3% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Energía de Casablanca

Energía de Casablanca's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Energía de Casablanca's dividend was only 18% of earnings, however it was paying out 99% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

If the trend of the last few years continues, EPS will grow by 14.7% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 21%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the first annual payment was CL$139, compared to the most recent full-year payment of CL$60.00. This works out to be a decline of approximately 8.1% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. We are encouraged to see that Energía de Casablanca has grown earnings per share at 15% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Energía de Casablanca's prospects of growing its dividend payments in the future.

Our Thoughts On Energía de Casablanca's Dividend

Overall, we always like to see the dividend being raised, but we don't think Energía de Casablanca will make a great income stock. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Energía de Casablanca (1 is potentially serious!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.