Here's What We Like About Sociedad Agrícola La Rosa Sofruco's (SNSE:SOFRUCO) Upcoming Dividend

Sociedad Agrícola La Rosa Sofruco S.A. (SNSE:SOFRUCO) is about to trade ex-dividend in the next 4 days. 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Sociedad Agrícola La Rosa Sofruco investors that purchase the stock on or after the 23rd of December will not receive the dividend, which will be paid on the 29th of December.

The company's upcoming dividend is CL$100.00 a share, following on from the last 12 months, when the company distributed a total of CL$40.36 per share to shareholders. Based on the last year's worth of payments, Sociedad Agrícola La Rosa Sofruco has a trailing yield of 2.0% on the current stock price of CL$2000.00. If you buy this business for its dividend, you should have an idea of whether Sociedad Agrícola La Rosa Sofruco's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

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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. Sociedad Agrícola La Rosa Sofruco is paying out just 5.5% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. It paid out 3.9% of its free cash flow as dividends last year, which is conservatively low.

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.

Check out our latest analysis for Sociedad Agrícola La Rosa Sofruco

Click here to see how much of its profit Sociedad Agrícola La Rosa Sofruco paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Sociedad Agrícola La Rosa Sofruco has grown its earnings rapidly, up 40% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Sociedad Agrícola La Rosa Sofruco looks like a promising growth company.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Sociedad Agrícola La Rosa Sofruco has seen its dividend decline 7.1% per annum on average over the past 10 years, which is not great to see. 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.

Final Takeaway

Should investors buy Sociedad Agrícola La Rosa Sofruco for the upcoming dividend? It's great that Sociedad Agrícola La Rosa Sofruco 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. Sociedad Agrícola La Rosa Sofruco looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 3 warning signs for Sociedad Agrícola La Rosa Sofruco (1 is significant!) that you ought to be aware of before buying the shares.

If you're in the market for strong dividend payers, we recommend checking 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.