Here's What We Like About Empresas Copec's (SNSE:COPEC) Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Empresas Copec S.A. (SNSE:COPEC) is about to go ex-dividend in just three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Meaning, you will need to purchase Empresas Copec's shares before the 15th of December to receive the dividend, which will be paid on the 18th of December.

The company's next dividend payment will be US$0.073 per share, on the back of last year when the company paid a total of US$0.23 to shareholders. Based on the last year's worth of payments, Empresas Copec has a trailing yield of 3.2% on the current stock price of CL$6727.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Empresas Copec can afford its dividend, and if the dividend could grow.

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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. Empresas Copec paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

See our latest analysis for Empresas Copec

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

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 Empresas Copec has grown its earnings rapidly, up 38% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Empresas Copec has seen its dividend decline 0.9% per annum on average over the past 10 years, which is not great to see.

The Bottom Line

Is Empresas Copec an attractive dividend stock, or better left on the shelf? Companies like Empresas Copec that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, Empresas Copec appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

While it's tempting to invest in Empresas Copec for the dividends alone, you should always be mindful of the risks involved. For example, we've found 3 warning signs for Empresas Copec that we recommend you consider before investing in the business.

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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.