Know This Before Buying Musée Grévin SA (EPA:GREV) For Its Dividend
Dividend paying stocks like Musée Grévin SA (EPA:GREV) 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. If you are hoping to live on your dividends, it's important to be more stringent with your investments than the average punter. Regular readers know we like to apply the same approach to each dividend stock, and we hope you'll find our analysis useful.
A slim 2.9% yield is hard to get excited about, but the long payment history is respectable. At the right price, or with strong growth opportunities, Musée Grévin could have potential. There are a few simple ways to reduce the risks of buying Musée Grévin for its dividend, and we'll go through these below.
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Payout ratios
Dividends are usually paid out of company earnings. If a company is paying more than it earns, then the dividend might become unsustainable - hardly an ideal situation. So we need to form a view on if a company's dividend is sustainable, relative to its net profit after tax. In the last year, Musée Grévin paid out 100% of its profit as dividends. This is quite a high payout ratio that suggests the dividend is not well covered by earnings.
Consider getting our latest analysis on Musée Grévin'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. For the purpose of this article, we only scrutinise the last decade of Musée Grévin's dividend payments. This dividend has been unstable, which we define as having fallen by at least 20% one or more times over this time. During the past ten-year period, the first annual payment was €5.36 in 2009, compared to €1.84 last year. This works out to a decline of approximately 66% over that time.
We struggle to make a case for buying Musée Grévin for its dividend, given that payments have shrunk over the past ten years.
Dividend Growth Potential
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. In the last five years, Musée Grévin's earnings per share have shrunk at approximately 17% per annum. If earnings continue to decline, the dividend may come under pressure. Every investor should make an assessment of whether the company is taking steps to stabilise the situation.
Conclusion
When we look at a dividend stock, we need to form a judgement on whether the dividend will grow, if the company is able to maintain it in a wide range of economic circumstances, and if the dividend payout is sustainable. First, it's not great to see how much of its earnings are being paid as dividends. Second, earnings per share have been in decline, and its dividend has been cut at least once in the past. With any dividend stock, we look for a sustainable payout ratio, steady dividends, and growing earnings. Musée Grévin has a few too many issues for us to get interested.
Now, if you want to look closer, it would be worth checking out our free research on Musée Grévin management tenure, salary, and performance.
Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.
