Southern Copper Corporation (NYSE:SCCO) Is About To Go Ex-Dividend, And It Pays A 2.6% Yield

Readers hoping to buy Southern Copper Corporation (NYSE:SCCO) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Southern Copper's shares before the 6th of November in order to be eligible for the dividend, which will be paid on the 21st of November.

The company's next dividend payment will be US$0.70 per share. Last year, in total, the company distributed US$2.80 to shareholders. Calculating the last year's worth of payments shows that Southern Copper has a trailing yield of 2.6% on the current share price of US$109.55. 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! So we need to investigate whether Southern Copper can afford its dividend, and if the dividend could grow.

View our latest analysis for Southern Copper

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Southern Copper is paying out an acceptable 61% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Southern Copper generated enough free cash flow to afford its dividend. It paid out more than half (73%) of its free cash flow in the past year, which is within an average range for most companies.

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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Southern Copper's earnings per share have been growing at 14% a year for the past five years. Southern Copper is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some 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. In the last 10 years, Southern Copper has lifted its dividend by approximately 15% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

From a dividend perspective, should investors buy or avoid Southern Copper? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Southern Copper's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 61% and 73% respectively. Overall, it's hard to get excited about Southern Copper from a dividend perspective.

While it's tempting to invest in Southern Copper for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Southern Copper 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.