Should You Buy Caisse régionale de Crédit Agricole Mutuel Atlantique Vendée (EPA:CRAV) For Its Dividend?

Could Caisse régionale de Crédit Agricole Mutuel Atlantique Vendée (EPA:CRAV) 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. 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.

In this case, Caisse régionale de Crédit Agricole Mutuel Atlantique Vendée likely looks attractive to investors, given its 3.5% 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 analysis can offer a lot of insights when buying a company for its dividend, and we'll go through this below.

Explore this interactive chart for our latest analysis on Caisse régionale de Crédit Agricole Mutuel Atlantique Vendée!

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. 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. 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. One of the risks is that management reinvests the retained capital poorly instead of paying a higher 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

From the perspective of an income investor who wants to earn dividends for many years, there is not much point buying a stock if its dividend is regularly cut or is not reliable. Caisse régionale de Crédit Agricole Mutuel Atlantique Vendée has been paying dividends for a long time, but for the purpose of this analysis, we only examine the past 10 years of 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 €4.5 in 2011, compared to €4.0 last year. The dividend has shrunk at around 1.3% a year during that period. 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.

A shrinking dividend over a 10-year period is not ideal, and we'd be concerned about investing in a dividend stock that lacks a solid record of growing dividends per share.

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? Caisse régionale de Crédit Agricole Mutuel Atlantique Vendée's earnings per share have shrunk at 13% 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.

Conclusion

To summarise, shareholders should always check that Caisse régionale de Crédit Agricole Mutuel Atlantique Vendée's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. Firstly, we like that Caisse régionale de Crédit Agricole Mutuel Atlantique Vendée has a low and conservative payout ratio. Second, earnings per share have been in decline, and its dividend has been cut at least once in the past. In summary, we're unenthused by Caisse régionale de Crédit Agricole Mutuel Atlantique Vendée 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.

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. Just as an example, we've come accross 3 warning signs for Caisse régionale de Crédit Agricole Mutuel Atlantique Vendée you should be aware of, and 1 of them shouldn't be ignored.

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