Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. In the past 10 years Sociedad Química y Minera de Chile SA. (NYSE:SQM) has returned an average of 3.00% per year to investors in the form of dividend payouts. Let’s dig deeper into whether Sociedad Química y Minera de Chile should have a place in your portfolio. See our latest analysis for Sociedad Química y Minera de Chile
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it the top 25% annual dividend yield payer?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Sociedad Química y Minera de Chile fit our criteria?The current trailing twelve-month payout ratio for SQM is 97.58%, which means that the dividend is not well-covered by its earnings. However, going forward, analysts expect SQM’s payout to fall into a more sustainable range of 68.64% of its earnings, which leads to a dividend yield of around 2.76%. In addition to this, EPS should increase to $1.85, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Although SQM’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again. Relative to peers, Sociedad Química y Minera de Chile generates a yield of 3.12%, which is high for Chemicals stocks but still below the market’s top dividend payers.
If you are building an income portfolio, then Sociedad Química y Minera de Chile is a complicated choice since it has some positive aspects as well as negative ones. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three relevant aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for SQM’s future growth? Take a look at our free research report of analyst consensus for SQM’s outlook.
- Valuation: What is SQM worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether SQM is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.