Copa Holdings (NYSE:CPA) Is Due To Pay A Dividend Of $1.61

Copa Holdings, S.A. (NYSE:CPA) will pay a dividend of $1.61 on the 15th of December. This makes the dividend yield 5.6%, which will augment investor returns quite nicely.

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Copa Holdings' Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last dividend, Copa Holdings is earning enough to cover the payment, but then it makes up 123% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to rise by 31.4% over the next year. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Copa Holdings

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of $3.36 in 2015 to the most recent total annual payment of $6.44. This implies that the company grew its distributions at a yearly rate of about 6.7% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Copa Holdings might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Copa Holdings has been growing its earnings per share at 56% a year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Copa Holdings could prove to be a strong dividend payer.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Copa Holdings' payments, as there could be some issues with sustaining them into the future. While Copa Holdings is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Copa Holdings that investors need to be conscious of moving forward. Is Copa Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.