Administradora de Fondos de Pensiones Provida S.A. (SNSE:PROVIDA) Will Pay A CL$237.00 Dividend In Three Days
Administradora de Fondos de Pensiones Provida S.A. (SNSE:PROVIDA) stock is about to trade ex-dividend in three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Administradora de Fondos de Pensiones Provida investors that purchase the stock on or after the 17th of December will not receive the dividend, which will be paid on the 22nd of December.
The company's next dividend payment will be CL$237.00 per share. Last year, in total, the company distributed CL$362 to shareholders. Calculating the last year's worth of payments shows that Administradora de Fondos de Pensiones Provida has a trailing yield of 5.9% on the current share price of CL$6156.50. 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 Administradora de Fondos de Pensiones Provida can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. It paid out 89% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Check out our latest analysis for Administradora de Fondos de Pensiones Provida
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Administradora de Fondos de Pensiones Provida earnings per share are up 2.8% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Administradora de Fondos de Pensiones Provida has delivered 7.6% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Should investors buy Administradora de Fondos de Pensiones Provida for the upcoming dividend? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. We're unconvinced on the company's merits, and think there might be better opportunities out there.
If you're not too concerned about Administradora de Fondos de Pensiones Provida's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. In terms of investment risks, we've identified 1 warning sign with Administradora de Fondos de Pensiones Provida and understanding them should be part of your investment process.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.