Enel Chile (SNSE:ENELCHILE) Has Announced A Dividend Of CLP0.9067

Enel Chile S.A. (SNSE:ENELCHILE) has announced that it will pay a dividend of CLP0.9067 per share on the 24th of January. This will take the dividend yield to an attractive 8.4%, providing a nice boost to shareholder returns.

See our latest analysis for Enel Chile

Enel Chile's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. But before making this announcement, Enel Chile's earnings quite easily covered the dividend. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Over the next year, EPS is forecast to fall by 41.0%. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 77%, meaning that most of the company's earnings are being paid out to shareholders.

Enel Chile's Dividend Has Lacked Consistency

Looking back, Enel Chile's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 9 years was CLP2.09 in 2015, and the most recent fiscal year payment was CLP4.58. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Enel Chile might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Enel Chile has grown earnings per share at 17% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Enel Chile's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Enel Chile's payments are rock solid. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think Enel Chile is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Enel Chile has 6 warning signs (and 1 which can't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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