Read This Before Considering Accor SA (EPA:AC) For Its Upcoming €1.18 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Accor SA (EPA:AC) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a 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. This means that investors who purchase Accor's shares on or after the 5th of June will not receive the dividend, which will be paid on the 7th of June.

The company's next dividend payment will be €1.18 per share, and in the last 12 months, the company paid a total of €1.18 per share. Calculating the last year's worth of payments shows that Accor has a trailing yield of 2.9% on the current share price of €40.27. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Accor

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Accor paid out more than half (54%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 61% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Accor'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.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Accor has grown its earnings rapidly, up 27% a year for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Accor could have strong prospects for future increases to the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Accor has lifted its dividend by approximately 4.0% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Accor is keeping back more of its profits to grow the business.

To Sum It Up

Is Accor an attractive dividend stock, or better left on the shelf? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. However, we'd also note that Accor is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. In summary, it's hard to get excited about Accor from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Accor has 1 warning sign we think you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.