Should You Buy Quiñenco SA (SNSE:QUINENCO) For Its Upcoming Dividend?

Readers hoping to buy Quiñenco SA (SNSE:QUINENCO) 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 two business days 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Quiñenco investors that purchase the stock on or after the 15th of December will not receive the dividend, which will be paid on the 18th of December.

The company's upcoming dividend is CL$60.141 a share, following on from the last 12 months, when the company distributed a total of CL$361 per share to shareholders. Based on the last year's worth of payments, Quiñenco has a trailing yield of 7.7% on the current stock price of CL$4660.60. If you buy this business for its dividend, you should have an idea of whether Quiñenco's dividend is reliable and sustainable. So we need to investigate whether Quiñenco can afford its dividend, and if the dividend could grow.

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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. Quiñenco paid out a comfortable 48% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 70% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Quiñenco's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

View our latest analysis for Quiñenco

Click here to see how much of its profit Quiñenco paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Quiñenco's earnings have been skyrocketing, up 34% per annum for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Quiñenco has lifted its dividend by approximately 17% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Is Quiñenco worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Quiñenco paid out less than half its earnings and a bit over half its free cash flow. Quiñenco looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Quiñenco for the dividends alone, you should always be mindful of the risks involved. To that end, you should learn about the 3 warning signs we've spotted with Quiñenco (including 2 which are a bit concerning).

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.