Does Caisse Régionale de Crédit Agricole Mutuel du Languedoc Société coopérative (EPA:CRLA) Have A Place In Your Dividend Portfolio?

Is Caisse Régionale de Crédit Agricole Mutuel du Languedoc Société coopérative (EPA:CRLA) a good dividend stock? How can we tell? Dividend paying companies with growing earnings can be highly rewarding in the long term. 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.

A high yield and a long history of paying dividends is an appealing combination for Caisse Régionale de Crédit Agricole Mutuel du Languedoc Société coopérative. It would not be a surprise to discover that many investors buy it for the dividends. Some simple research can reduce the risk of buying Caisse Régionale de Crédit Agricole Mutuel du Languedoc Société coopérative for its dividend - read on to learn more.

Click the interactive chart for our full dividend analysis

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 du Languedoc Société coopérative paid out 46% 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.

Remember, you can always get a snapshot of Caisse Régionale de Crédit Agricole Mutuel du Languedoc Société coopérative's latest financial position, by checking our visualisation of its financial health.

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 du Languedoc 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. The dividend has been stable over the past 10 years, which is great. We think this could suggest some resilience to the business and its dividends. During the past 10-year period, the first annual payment was €2.4 in 2011, compared to €2.6 last year. Its dividends have grown at less than 1% per annum over this time frame.

Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think is seriously impressive.

Dividend Growth Potential

While dividend payments have been relatively reliable, it would also be nice if earnings per share (EPS) were growing, as this is essential to maintaining the dividend's purchasing power over the long term. It's not great to see that Caisse Régionale de Crédit Agricole Mutuel du Languedoc Société coopérative's have fallen at approximately 7.3% over the past five years. If earnings continue to decline, the dividend may come under pressure. Every investor should make an assessment of whether the company is taking steps to stabilise the situation.

We'd also point out that Caisse Régionale de Crédit Agricole Mutuel du Languedoc 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

To summarise, shareholders should always check that Caisse Régionale de Crédit Agricole Mutuel du Languedoc 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. Firstly, we like that Caisse Régionale de Crédit Agricole Mutuel du Languedoc Société coopérative has a low and conservative payout ratio. 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. While we're not hugely bearish on it, overall we think there are potentially better dividend stocks than Caisse Régionale de Crédit Agricole Mutuel du Languedoc Société coopérative out there.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Caisse Régionale de Crédit Agricole Mutuel du Languedoc Société coopérative has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

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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