Is Caisse Regionale de Credit Agricole Mutuel Toulouse 31 (EPA:CAT31) A Smart Pick For Income Investors?
Dividend paying stocks like Caisse Regionale de Credit Agricole Mutuel Toulouse 31 (EPA:CAT31) tend to be popular with investors, and for good reason - some research suggests a significant amount of all stock market returns come from reinvested dividends. Yet sometimes, investors buy a stock for its dividend and lose money because the share price falls by more than they earned in dividend payments.
A high yield and a long history of paying dividends is an appealing combination for Caisse Regionale de Credit Agricole Mutuel Toulouse 31. We'd guess that plenty of investors have purchased it for the income. Before you buy any stock for its dividend however, you should always remember Warren Buffett's two rules: 1) Don't lose money, and 2) Remember rule #1. We'll run through some checks below to help with this.
Payout ratios
Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. As a result, we should always investigate whether a company can afford its dividend, measured as a percentage of a company's net income after tax. Looking at the data, we can see that 35% of Caisse Regionale de Credit Agricole Mutuel Toulouse 31's profits were paid out as dividends in the last 12 months. This is a medium payout level that leaves enough capital in the business to fund opportunities that might arise, while also rewarding shareholders. One of the risks is that management reinvests the retained capital poorly instead of paying a higher dividend.
Consider getting our latest analysis on Caisse Regionale de Credit Agricole Mutuel Toulouse 31's financial position here.
Dividend Volatility
One of the major risks of relying on dividend income, is the potential for a company to struggle financially and cut its dividend. Not only is your income cut, but the value of your investment declines as well - nasty. Caisse Regionale de Credit Agricole Mutuel Toulouse 31 has been paying dividends for a long time, but for the purpose of this analysis, we only examine the past 10 years of payments. The dividend has been stable over the past 10 years, which is great. We think this could suggest some resilience to the business and its dividends. During the past ten-year period, the first annual payment was €3.26 in 2009, compared to €4.37 last year. This works out to be a compound annual growth rate (CAGR) of approximately 3.0% a year over that time.
While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is unappealing.
Dividend Growth Potential
Dividend payments have been consistent over the past few years, but we should always check if earnings per share (EPS) are growing, as this will help maintain the purchasing power of the dividend. It's not great to see that Caisse Regionale de Credit Agricole Mutuel Toulouse 31's have fallen at approximately 3.5% over the past five years. Declining earnings per share over a number of years is not a great sign for the dividend investor. Without some improvement, this does not bode well for the long term value of a company's dividend.
Conclusion
To summarise, shareholders should always check that Caisse Regionale de Credit Agricole Mutuel Toulouse 31's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. We're glad to see Caisse Regionale de Credit Agricole Mutuel Toulouse 31 has a low payout ratio, as this suggests earnings are being reinvested in the business. Moreover, earnings have been shrinking. While the dividends have been fairly steady, we'd wonder for how much longer this will be sustainable if earnings continue to decline. In summary, we're unenthused by Caisse Regionale de Credit Agricole Mutuel Toulouse 31 as a dividend stock. It's not that we think it is a bad company; it simply falls short of our criteria in some key areas.
Are management backing themselves to deliver performance? Check their shareholdings in Caisse Regionale de Credit Agricole Mutuel Toulouse 31 in our latest insider ownership analysis.
We have also put together a list of global stocks with a market capitalisation above $1bn and yielding more 3%.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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