Zooming in on EPA:CNF's 4.8% Dividend Yield

Could Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative (EPA:CNF) be an attractive dividend share to own for the long haul? Investors are often drawn to strong companies with the idea of reinvesting the 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.

With Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative yielding 4.8% 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. Some simple analysis can offer a lot of insights when buying a company for its dividend, and we'll go through this 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. As a result, we should always investigate whether a company can afford its dividend, measured as a percentage of a company's net income after tax. In the last year, Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative paid out 71% of its profit as dividends. A payout ratio above 50% generally implies a business is reaching maturity, although it is still possible to reinvest in the business or increase the dividend 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 2010, 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.

We struggle to make a case for buying Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative for its dividend, given that payments have shrunk over the past 10 years.

Dividend Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative's EPS have fallen by approximately 10% per year during the past five years. With this kind of significant decline, we always wonder what has changed in the business. Dividends are about stability, and Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative's earnings per share, which support the dividend, have been anything but stable.

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

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. Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative's payout ratio is within an average range for most market participants. 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. With this information in mind, we think Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative may not be an ideal dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come accross 3 warning signs for Caisse Régionale de Crédit Agricole Mutuel Nord de France Société coopérative you should be aware of, and 1 of them is concerning.

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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