It looks like Etn. Fr. Colruyt NV (EBR:COLR) is about to go ex-dividend in the next 3 days. If you purchase the stock on or after the 27th of September, you won’t be eligible to receive this dividend, when it is paid on the 1st of October.
Etn. Fr. Colruyt’s next dividend payment will be €0.9 per share. Last year, in total, the company distributed €1.3 to shareholders. Based on the last year’s worth of payments, Etn. Fr. Colruyt stock has a trailing yield of around 2.8% on the current share price of €46.93. If you buy this business for its dividend, you should have an idea of whether Etn. Fr. Colruyt’s dividend is reliable and sustainable. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Etn. Fr. Colruyt’s payout ratio is modest, at just 47% of profit. 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 90% of its free cash flow as dividends, which is within usual limits but will limit the company’s ability to lift the dividend if there’s no growth.
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.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we’re encouraged by the steady growth at Etn. Fr. Colruyt, with earnings per share up 4.4% on average over the last five years. A payout ratio of 47% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. In the past ten years, Etn. Fr. Colruyt has increased its dividend at approximately 5.0% a year on average. 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
From a dividend perspective, should investors buy or avoid Etn. Fr. Colruyt? Earnings per share have been growing at a steady rate, and Etn. Fr. Colruyt paid out less than half its profits and more than half its free cash flow as dividends over the last year. In summary, while it has some positive characteristics, we’re not inclined to race out and buy Etn. Fr. Colruyt today.
Wondering what the future holds for Etn. Fr. Colruyt? See what the 12 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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