Compañía Eléctrica del Litoral (SNSE:LITORAL) Is Increasing Its Dividend To CLP449.9

Compañía Eléctrica del Litoral S.A. (SNSE:LITORAL) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of May to CLP449.9. Although the dividend is now higher, the yield is only 4.0%, which is below the industry average.

Our free stock report includes 2 warning signs investors should be aware of before investing in Compañía Eléctrica del Litoral. Read for free now.

Compañía Eléctrica del Litoral's Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, based ont he last payment, Compañía Eléctrica del Litoral was earning enough to cover the dividend pretty comfortably. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

If the trend of the last few years continues, EPS will grow by 19.2% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Compañía Eléctrica del Litoral

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was CLP605.00 in 2015, and the most recent fiscal year payment was CLP449.9. The dividend has shrunk at around 2.9% a year during that period. 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

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Compañía Eléctrica del Litoral has grown earnings per share at 19% per year over the past five years. Compañía Eléctrica del Litoral definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Compañía Eléctrica del Litoral will make a great income stock. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Compañía Eléctrica del Litoral 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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