Should You Or Shouldn't You: A Dividend Analysis on Caisse Régionale de Crédit Agricole Mutuel de La Touraine et du Poitou Société Coopérative (EPA:CRTO)

Dividend paying stocks like Caisse Régionale de Crédit Agricole Mutuel de La Touraine et du Poitou Société Coopérative (EPA:CRTO) 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. 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.

In this case, Caisse Régionale de Crédit Agricole Mutuel de La Touraine et du Poitou Société Coopérative likely looks attractive to investors, given its 3.4% dividend yield and a payment history of over ten years. It would not be a surprise to discover that many investors buy it for the dividends. 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

Dividends are usually paid out of company earnings. If a company is paying more than it earns, 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 de La Touraine et du Poitou Société Coopérative paid out 26% 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. Plus, there is room to increase the payout ratio over time.

Consider getting our latest analysis on Caisse Régionale de Crédit Agricole Mutuel de La Touraine et du Poitou Société Coopérative's financial position 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. For the purpose of this article, we only scrutinise the last decade of Caisse Régionale de Crédit Agricole Mutuel de La Touraine et du Poitou Société Coopérative's dividend payments. Its dividend payments have declined on at least one occasion over the past 10 years. During the past 10-year period, the first annual payment was €3.0 in 2011, compared to €3.2 last year. Dividend payments have grown at less than 1% a year over this period.

Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

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. While there may be fluctuations in the past , Caisse Régionale de Crédit Agricole Mutuel de La Touraine et du Poitou Société Coopérative's earnings per share have basically not grown from where they were five years ago. Flat earnings per share are acceptable for a time, but over the long term, the purchasing power of the company's dividends could be eroded by inflation.

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. Firstly, we like that Caisse Régionale de Crédit Agricole Mutuel de La Touraine et du Poitou Société Coopérative 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. While we're not hugely bearish on it, overall we think there are potentially better dividend stocks than Caisse Régionale de Crédit Agricole Mutuel de La Touraine et du Poitou Société Coopérative out there.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Caisse Régionale de Crédit Agricole Mutuel de La Touraine et du Poitou Société Coopérative (1 is a bit concerning!) that you should be aware of before investing.

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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