Looking For Steady Income For Your Dividend Portfolio? Is Caisse Régionale de Crédit Agricole Mutuel Alpes Provence Société coopérative (EPA:CRAP) A Good Fit?

Dividend paying stocks like Caisse Régionale de Crédit Agricole Mutuel Alpes Provence Société coopérative (EPA:CRAP) 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. 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.

In this case, Caisse Régionale de Crédit Agricole Mutuel Alpes Provence Société coopérative likely looks attractive to investors, given its 3.7% dividend yield and a payment history of over ten years. We'd guess that plenty of investors have purchased it for the income. Before you buy any stock for its dividend however, you should always remember Warren Buffett's two rules: 1) Don't lose money, and 2) Remember rule #1. We'll run through some checks below to help with this.

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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. So we need to form a view on if a company's dividend is sustainable, relative to its net profit after tax. Looking at the data, we can see that 101% of Caisse Régionale de Crédit Agricole Mutuel Alpes Provence Société coopérative's profits were paid out as dividends in the last 12 months. This is quite a high payout ratio that suggests the dividend is not well covered by earnings.

We update our data on Caisse Régionale de Crédit Agricole Mutuel Alpes Provence Société coopérative every 24 hours, so you can always get our latest analysis of its financial health, here.

Dividend Volatility

One of the major risks of relying on dividend income, is the potential for a company to struggle financially and cut its dividend. Not only is your income cut, but the value of your investment declines as well - nasty. Caisse Régionale de Crédit Agricole Mutuel Alpes Provence Société coopérative has been paying dividends for a long time, but for the purpose of this analysis, we only examine the past 10 years of payments. During this period the dividend has been stable, which could imply the business could have relatively consistent earnings power. During the past 10-year period, the first annual payment was €2.2 in 2010, compared to €3.7 last year. Dividends per share have grown at approximately 5.4% per year over this time.

Businesses that can grow their dividends at a decent rate and maintain a stable payout can generate substantial wealth for shareholders over the long term.

Dividend Growth Potential

Dividend payments have been consistent over the past few years, but we should always check if earnings per share (EPS) are growing, as this will help maintain the purchasing power of the dividend. Caisse Régionale de Crédit Agricole Mutuel Alpes Provence Société coopérative's EPS have fallen by approximately 22% 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 Alpes Provence 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 Alpes Provence Société coopérative issued a meaningful number of new shares in the past year. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

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 Alpes Provence Société coopérative is paying out a larger percentage of its profit than we're comfortable with. Moreover, earnings have been shrinking. While the dividends have been fairly steady, we'd wonder for how much longer this will be sustainable if earnings continue to decline. To conclude, we've spotted a couple of potential concerns with Caisse Régionale de Crédit Agricole Mutuel Alpes Provence Société coopérative that may make it less than ideal candidate for dividend investors.

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. For example, we've identified 4 warning signs for Caisse Régionale de Crédit Agricole Mutuel Alpes Provence Société coopérative (1 is potentially serious!) that you should be aware of before investing.

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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