Should Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France (EPA:CAF) Be Part Of Your Dividend Portfolio?

Is Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France (EPA:CAF) a good dividend stock? How can we tell? Dividend paying companies with growing earnings can be highly rewarding in the long term. 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.

In this case, Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France likely looks attractive to investors, given its 3.3% dividend yield and a payment history of over ten years. We'd guess that plenty of investors have purchased it for the income. Some simple research can reduce the risk of buying Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France for its dividend - read on to learn more.

Explore this interactive chart for our latest analysis on Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France!

Payout ratios

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Comparing dividend payments to a company's net profit after tax is a simple way of reality-checking whether a dividend is sustainable. In the last year, Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France paid out 34% of its profit as dividends. This is a medium payout level that leaves enough capital in the business to fund opportunities that might arise, while also rewarding shareholders. Besides, if reinvestment opportunities dry up, the company has room to increase the dividend.

We update our data on Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France every 24 hours, so you can always get our latest analysis of its financial health, here.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. For the purpose of this article, we only scrutinise the last decade of Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France's dividend payments. Its dividend payments have declined on at least one occasion over the past 10 years. During the past 10-year period, the first annual payment was €2.7 in 2011, compared to €2.6 last year. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame.

When a company's per-share dividend falls we question if this reflects poorly on either external business conditions, or the company's capital allocation decisions. Either way, we find it hard to get excited about a company with a declining dividend.

Dividend Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share (EPS) are growing - it's not worth taking the risk on a dividend getting cut, unless you might be rewarded with larger dividends in future. In the last five years, Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France's earnings per share have shrunk at approximately 4.7% 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

Dividend investors should always want to know if a) a company's dividends are affordable, b) if there is a track record of consistent payments, and c) if the dividend is capable of growing. We're glad to see Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France has a low payout ratio, as this suggests earnings are being reinvested in the business. Earnings per share have been falling, and the company has cut its dividend at least once in the past. From a dividend perspective, this is a cause for concern. In summary, we're unenthused by Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come accross 2 warning signs for Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France you should be aware of, and 1 of them is a bit concerning.

Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.

When trading Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.