Southern Copper Corporation (NYSE:SCCO) Looks Interesting, And It's About To Pay A Dividend

By
Simply Wall St
Published
August 06, 2021
NYSE:SCCO
Source: Shutterstock

Southern Copper Corporation (NYSE:SCCO) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Southern Copper's shares on or after the 11th of August will not receive the dividend, which will be paid on the 26th of August.

The company's next dividend payment will be US$0.90 per share, on the back of last year when the company paid a total of US$2.80 to shareholders. Based on the last year's worth of payments, Southern Copper has a trailing yield of 4.3% on the current stock price of $65.41. If you buy this business for its dividend, you should have an idea of whether Southern Copper's dividend is reliable and sustainable. 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 typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Southern Copper paid out more than half (61%) of its earnings last year, which is a regular payout ratio for 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 (59%) 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.

historic-dividend
NYSE:SCCO Historic Dividend August 7th 2021

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. It's encouraging to see Southern Copper has grown its earnings rapidly, up 31% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Southern Copper could have strong prospects for future increases to the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Southern Copper has delivered an average of 5.2% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Southern Copper is keeping back more of its profits to grow the business.

To Sum It Up

Has Southern Copper got what it takes to maintain its dividend payments? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. However, we'd also note that Southern Copper is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. In summary, it's hard to get excited about Southern Copper from a dividend perspective.

On that note, you'll want to research what risks Southern Copper is facing. For example, Southern Copper has 4 warning signs (and 1 which is potentially serious) we think you should know about.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

When trading Southern Copper or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.