Be Sure To Check Out Compañía Electro Metalúrgica S.A. (SNSE:ELECMETAL) Before It Goes Ex-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 Compañía Electro Metalúrgica S.A. (SNSE:ELECMETAL) is about to go ex-dividend in just four days. The ex-dividend date is usually set to be one business day 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Compañía Electro Metalúrgica's shares on or after the 21st of October will not receive the dividend, which will be paid on the 24th of October.

The company's next dividend payment will be CL$74.00 per share, and in the last 12 months, the company paid a total of CL$432 per share. Looking at the last 12 months of distributions, Compañía Electro Metalúrgica has a trailing yield of approximately 6.0% on its current stock price of CL$7201.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Compañía Electro Metalúrgica

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. Compañía Electro Metalúrgica paid out a comfortable 35% of its profit last year. A useful secondary check can be to evaluate whether Compañía Electro Metalúrgica generated enough free cash flow to afford its dividend. Luckily it paid out just 20% of its free cash flow last year.

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 how much of its profit Compañía Electro Metalúrgica 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Compañía Electro Metalúrgica's earnings per share have risen 17% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Compañía Electro Metalúrgica's dividend payments per share have declined at 3.2% per year on average over the past 10 years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

To Sum It Up

Is Compañía Electro Metalúrgica an attractive dividend stock, or better left on the shelf? It's great that Compañía Electro Metalúrgica is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Compañía Electro Metalúrgica is facing. In terms of investment risks, we've identified 2 warning signs with Compañía Electro Metalúrgica and understanding them should be part of your investment process.

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.