Three Days Left Until Compagnie Du Mont-Blanc (EPA:MLCMB) Trades Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Compagnie Du Mont-Blanc (EPA:MLCMB) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 2nd of December will not receive this dividend, which will be paid on the 4th of December.

Compagnie Du Mont-Blanc's next dividend payment will be €3.20 per share, on the back of last year when the company paid a total of €3.20 to shareholders. Last year's total dividend payments show that Compagnie Du Mont-Blanc has a trailing yield of 2.5% on the current share price of €126. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Compagnie Du Mont-Blanc

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. Compagnie Du Mont-Blanc has a low and conservative payout ratio of just 21% of its income after tax. A useful secondary check can be to evaluate whether Compagnie Du Mont-Blanc generated enough free cash flow to afford its dividend. Over the past year it paid out 148% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

While Compagnie Du Mont-Blanc's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Compagnie Du Mont-Blanc's ability to maintain its dividend.

Click here to see how much of its profit Compagnie Du Mont-Blanc paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Compagnie Du Mont-Blanc has grown its earnings rapidly, up 20% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Compagnie Du Mont-Blanc has delivered an average of 0.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Final Takeaway

Is Compagnie Du Mont-Blanc an attractive dividend stock, or better left on the shelf? We like that Compagnie Du Mont-Blanc has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

So while Compagnie Du Mont-Blanc looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 3 warning signs with Compagnie Du Mont-Blanc and understanding them should be part of your investment process.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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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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