Is Piscines Desjoyaux SA (EPA:ALPDX) A Smart Pick For Income Investors?

Is Piscines Desjoyaux SA (EPA:ALPDX) a good dividend stock? How can we tell? Dividend paying companies with growing earnings can be highly rewarding in the long term. 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.

While Piscines Desjoyaux's 2.2% dividend yield is not the highest, we think its lengthy payment history is quite interesting. That said, the recent jump in the share price will make Piscines Desjoyaux's dividend yield look smaller, even though the company prospects could be improving. 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 Piscines Desjoyaux!

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. In the last year, Piscines Desjoyaux paid out 41% 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.

With a strong net cash balance, Piscines Desjoyaux investors may not have much to worry about in the near term from a dividend perspective.

Consider getting our latest analysis on Piscines Desjoyaux'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 Piscines Desjoyaux's dividend payments. During this period the dividend has been stable, which could imply the business could have relatively consistent earnings power. During the past 10-year period, the first annual payment was €0.3 in 2011, compared to €0.5 last year. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% 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

Dividend payments have been consistent over the past few years, but we should always check if earnings per share (EPS) are growing, as this will help maintain the purchasing power of the dividend. It's good to see Piscines Desjoyaux has been growing its earnings per share at 34% a year over the past five years. With high earnings per share growth in recent times and a modest payout ratio, we think this is an attractive combination if earnings can be reinvested to generate further growth.

Conclusion

To summarise, shareholders should always check that Piscines Desjoyaux'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 Piscines Desjoyaux has a low and conservative payout ratio. We like that it has been delivering solid improvement in its earnings per share, and relatively consistent dividend payments. Piscines Desjoyaux fits all of our criteria, and we think there are a lot of positives to it from a dividend perspective.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Piscines Desjoyaux that investors need to be conscious of moving forward.

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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