Are Dividend Investors Getting More Than They Bargained For With Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative's (EPA:CNF) Dividend?

Dividend paying stocks like Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative (EPA:CNF) 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. On the other hand, investors have been known to buy a stock because of its yield, and then lose money if the company's dividend doesn't live up to expectations.

With Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative yielding 4.6% and having paid a dividend for over 10 years, many investors likely find the company quite interesting. We'd guess that plenty of investors have purchased it for the income. There are a few simple ways to reduce the risks of buying Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative for its dividend, and we'll go through these below.

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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. 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 Nord de France Société coopérative paid out 60% of its profit as dividends. This is a healthy payout ratio, and while it does limit the amount of earnings that can be reinvested in the business, there is also some room to lift the payout ratio over time.

Consider getting our latest analysis on Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative's financial position 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 Nord de France Société coopérative's dividend payments. This dividend has been unstable, which we define as having been cut one or more times over this time. During the past 10-year period, the first annual payment was €1.3 in 2011, compared to €1.1 last year. The dividend has shrunk at around 1.7% a year during that period. Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative's dividend hasn't shrunk linearly at 1.7% per annum, but the CAGR is a useful estimate of the historical rate of change.

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 see if earnings per share (EPS) are growing. Why take the risk of a dividend getting cut, unless there's a good chance of bigger dividends in future? Over the past five years, it looks as though Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative's EPS have declined at around 8.9% a year. 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.

We'd also point out that Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative issued a meaningful number of new shares in the past year. Regularly issuing new shares can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Conclusion

To summarise, shareholders should always check that Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. First, we think Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative has an acceptable payout ratio. Second, earnings per share have been in decline, and its dividend has been cut at least once in the past. To conclude, we've spotted a couple of potential concerns with Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative that may make it less than ideal candidate for dividend investors.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative that investors should know about before committing capital to this stock.

If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 3%.

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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.
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