Is It Worth Considering Compagnie d'Entreprises CFE SA (EBR:CFEB) For Its Upcoming Dividend?

Compagnie d'Entreprises CFE SA (EBR:CFEB) stock is about to trade ex-dividend in four 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Therefore, if you purchase Compagnie d'Entreprises CFE's shares on or after the 19th of May, you won't be eligible to receive the dividend, when it is paid on the 21st of May.

The company's next dividend payment will be €0.28 per share. Last year, in total, the company distributed €0.40 to shareholders. Calculating the last year's worth of payments shows that Compagnie d'Entreprises CFE has a trailing yield of 4.5% on the current share price of €8.86. If you buy this business for its dividend, you should have an idea of whether Compagnie d'Entreprises CFE's dividend is reliable and sustainable. As a result, readers should always check whether Compagnie d'Entreprises CFE has been able to grow its dividends, or if the dividend might be cut.

Our free stock report includes 1 warning sign investors should be aware of before investing in Compagnie d'Entreprises CFE. Read for free now.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Compagnie d'Entreprises CFE paid out a comfortable 41% of its profit last year. A useful secondary check can be to evaluate whether Compagnie d'Entreprises CFE generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 13% of its cash flow last year.

It's positive to see that Compagnie d'Entreprises CFE's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Check out our latest analysis for Compagnie d'Entreprises CFE

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by Compagnie d'Entreprises CFE's 29% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Compagnie d'Entreprises CFE's dividend payments per share have declined at 15% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

To Sum It Up

Has Compagnie d'Entreprises CFE got what it takes to maintain its dividend payments? Compagnie d'Entreprises CFE has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. In summary, while it has some positive characteristics, we're not inclined to race out and buy Compagnie d'Entreprises CFE today.

On that note, you'll want to research what risks Compagnie d'Entreprises CFE is facing. Our analysis shows 1 warning sign for Compagnie d'Entreprises CFE and you should be aware of this before buying any shares.

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.