Be Sure To Check Out Naturgy Chile Gas Natural S.A. (SNSE:NTGCLGAS) Before It Goes Ex-Dividend

Naturgy Chile Gas Natural S.A. (SNSE:NTGCLGAS) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Naturgy Chile Gas Natural's shares on or after the 10th of December, you won't be eligible to receive the dividend, when it is paid on the 15th of December.

The company's upcoming dividend is CL$79.00 a share, following on from the last 12 months, when the company distributed a total of CL$62.00 per share to shareholders. Calculating the last year's worth of payments shows that Naturgy Chile Gas Natural has a trailing yield of 9.8% on the current share price of CL$630.19. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The company paid out 100% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

While Naturgy Chile Gas Natural's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Naturgy Chile Gas Natural to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Check out our latest analysis for Naturgy Chile Gas Natural

Click here to see how much of its profit Naturgy Chile Gas Natural 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Naturgy Chile Gas Natural's earnings per share have risen 16% per annum over the last five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Naturgy Chile Gas Natural has delivered an average of 13% per year annual increase in its dividend, based on the past nine years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Is Naturgy Chile Gas Natural worth buying for its dividend? We like that Naturgy Chile Gas Natural has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. All things considered, we are not particularly enthused about Naturgy Chile Gas Natural from a dividend perspective.

In light of that, while Naturgy Chile Gas Natural has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 2 warning signs with Naturgy Chile Gas Natural and understanding them should be part of your investment process.

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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.