Don't Buy Bénéteau S.A. (EPA:BEN) For Its Next Dividend Without Doing These Checks

Bénéteau S.A. (EPA:BEN) stock is about to trade ex-dividend in three days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Bénéteau's shares before the 25th of June to receive the dividend, which will be paid on the 27th of June.

The company's next dividend payment will be €0.22 per share, on the back of last year when the company paid a total of €0.22 to shareholders. Based on the last year's worth of payments, Bénéteau has a trailing yield of 2.8% on the current stock price of €7.905. If you buy this business for its dividend, you should have an idea of whether Bénéteau's dividend is reliable and sustainable. So we need to investigate whether Bénéteau can afford its dividend, and if the dividend could grow.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Bénéteau paid out 60% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Bénéteau generated enough free cash flow to afford its dividend. Over the last year it paid out 57% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Bénéteau's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Check out our latest analysis for Bénéteau

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Bénéteau's earnings per share have fallen at approximately 7.2% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Bénéteau has lifted its dividend by approximately 19% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

To Sum It Up

Is Bénéteau an attractive dividend stock, or better left on the shelf? While earnings per share are shrinking, it's encouraging to see that at least Bénéteau's dividend appears sustainable, with earnings and cashflow payout ratios that are within reasonable bounds. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

With that being said, if you're still considering Bénéteau as an investment, you'll find it beneficial to know what risks this stock is facing. Every company has risks, and we've spotted 3 warning signs for Bénéteau you should know about.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.