Would Caisse régionale de Crédit Agricole Mutuel Loire Haute-Loire - Société coopérative (EPA:CRLO) Be Valuable To Income Investors?

Today we'll take a closer look at Caisse régionale de Crédit Agricole Mutuel Loire Haute-Loire - Société coopérative (EPA:CRLO) 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. Yet sometimes, investors buy a stock for its dividend and lose money because the share price falls by more than they earned in dividend payments.

A high yield and a long history of paying dividends is an appealing combination for Caisse régionale de Crédit Agricole Mutuel Loire Haute-Loire - 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 Loire Haute-Loire - Société coopérative for its dividend - read on to learn more.

Click the interactive chart for our full dividend analysis

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. In the last year, Caisse régionale de Crédit Agricole Mutuel Loire Haute-Loire - Société coopérative paid out 26% of its profit as dividends. This is a medium payout level that leaves enough capital in the business to fund opportunities that might arise, while also rewarding shareholders. Plus, there is room to increase the payout ratio over time.

Remember, you can always get a snapshot of Caisse régionale de Crédit Agricole Mutuel Loire Haute-Loire - 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. For the purpose of this article, we only scrutinise the last decade of Caisse régionale de Crédit Agricole Mutuel Loire Haute-Loire - Société coopérative's dividend 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 2010, compared to €2.9 last year. This works out to be a compound annual growth rate (CAGR) of approximately 2.0% a year over that time.

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. In the last five years, Caisse régionale de Crédit Agricole Mutuel Loire Haute-Loire - Société coopérative's earnings per share have shrunk at approximately 2.2% per annum. Declining earnings per share over a number of years is not a great sign for the dividend investor. Without some improvement, this does not bode well for the long term value of a company's dividend.

We'd also point out that Caisse régionale de Crédit Agricole Mutuel Loire Haute-Loire - 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. Firstly, we like that Caisse régionale de Crédit Agricole Mutuel Loire Haute-Loire - Société coopérative has a low and conservative payout ratio. It's not great to see earnings per share shrinking. The dividends have been relatively consistent, but we wonder for how much longer this will be true. Caisse régionale de Crédit Agricole Mutuel Loire Haute-Loire - Société coopérative might not be a bad business, but it doesn't show all of the characteristics we look for in a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Caisse régionale de Crédit Agricole Mutuel Loire Haute-Loire - Société coopérative has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

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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