There's A Lot To Like About Compañía Eléctrica del Litoral's (SNSE:LITORAL) Upcoming CL$449.90117 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Compañía Eléctrica del Litoral S.A. (SNSE:LITORAL) is about to trade ex-dividend in the next four days. The ex-dividend date generally occurs two days 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Compañía Eléctrica del Litoral investors that purchase the stock on or after the 22nd of May will not receive the dividend, which will be paid on the 27th of May.

The company's next dividend payment will be CL$449.90117 per share. Last year, in total, the company distributed CL$450 to shareholders. Based on the last year's worth of payments, Compañía Eléctrica del Litoral has a trailing yield of 4.0% on the current stock price of CL$11346.53. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Compañía Eléctrica del Litoral has been able to grow its dividends, or if the dividend might be cut.

We've discovered 2 warning signs about Compañía Eléctrica del Litoral. View them for free.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Compañía Eléctrica del Litoral's payout ratio is modest, at just 30% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Dividends consumed 74% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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.

View our latest analysis for Compañía Eléctrica del Litoral

Click here to see how much of its profit Compañía Eléctrica del Litoral paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Compañía Eléctrica del Litoral's earnings per share have risen 19% per annum over the last five years. Compañía Eléctrica del Litoral has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Compañía Eléctrica del Litoral's dividend payments per share have declined at 2.9% per year on average over the past 10 years, which is uninspiring. Compañía Eléctrica del Litoral is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

Should investors buy Compañía Eléctrica del Litoral for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Compañía Eléctrica del Litoral paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Compañía Eléctrica del Litoral, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Compañía Eléctrica del Litoral is facing. In terms of investment risks, we've identified 2 warning signs with Compañía Eléctrica del Litoral and understanding them should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.