Enel Chile (SNSE:ENELCHILE) Will Pay A Dividend Of CLP3.98

Enel Chile S.A. (SNSE:ENELCHILE) has announced that it will pay a dividend of CLP3.98 per share on the 29th of May. However, the dividend yield of 8.3% is still a decent boost to shareholder returns.

View our latest analysis for Enel Chile

Enel Chile's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Enel Chile's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Over the next year, EPS is forecast to fall by 13.1%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 59%, which is comfortable for the company to continue in the future.

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 dividend has gone from an annual total of CLP2.09 in 2016 to the most recent total annual payment of CLP4.58. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Enel Chile Could Grow Its Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Enel Chile has grown earnings per share at 6.5% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 5 warning signs for Enel Chile (2 are concerning!) that you should be aware of before investing. Is Enel Chile not quite the opportunity you were looking for? Why not check out 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.