Should Caisse régionale de Crédit Agricole Mutuel Atlantique Vendée (EPA:CRAV) Be Part Of Your Dividend Portfolio?

Today we'll take a closer look at Caisse régionale de Crédit Agricole Mutuel Atlantique Vendée (EPA:CRAV) from a dividend investor's perspective. Owning a strong business and reinvesting the dividends is widely seen as an attractive way of growing your wealth. 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.

A high yield and a long history of paying dividends is an appealing combination for Caisse régionale de Crédit Agricole Mutuel Atlantique Vendée. It would not be a surprise to discover that many investors buy it for the dividends. When buying stocks for their dividends, you should always run through the checks below, to see if the dividend looks sustainable.

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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. Caisse régionale de Crédit Agricole Mutuel Atlantique Vendée paid out 45% of its profit as dividends, over the trailing twelve month period. A medium payout ratio strikes a good balance between paying dividends, and keeping enough back to invest in the business. 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 Atlantique Vendée 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. For the purpose of this article, we only scrutinise the last decade of Caisse régionale de Crédit Agricole Mutuel Atlantique Vendée's dividend payments. The dividend has been cut on at least one occasion historically. During the past 10-year period, the first annual payment was €4.5 in 2010, compared to €4.0 last year. This works out to be a decline of approximately 1.3% per year over that time. Caisse régionale de Crédit Agricole Mutuel Atlantique Vendée's dividend hasn't shrunk linearly at 1.3% 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 Atlantique Vendée 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 Atlantique Vendée's earnings per share have shrunk at 11% a year over 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 Atlantique Vendée'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 Atlantique Vendée 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

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 Atlantique Vendée has a low payout ratio, as this suggests earnings are being reinvested in the business. Second, earnings per share have been in decline, and its dividend has been cut at least once in the past. While we're not hugely bearish on it, overall we think there are potentially better dividend stocks than Caisse régionale de Crédit Agricole Mutuel Atlantique Vendée out there.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come accross 4 warning signs for Caisse régionale de Crédit Agricole Mutuel Atlantique Vendée you should be aware of, and 1 of them can't be ignored.

We have also put together a list of global stocks with a market capitalisation above $1bn and yielding more 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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