Here's Why We're Wary Of Buying Les Docks des Pétroles d'Ambès -SA's (EPA:DPAM) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Les Docks des Pétroles d'Ambès -SA (EPA:DPAM) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Les Docks des Pétroles d'Ambès -SA's shares before the 26th of June in order to be eligible for the dividend, which will be paid on the 28th of June.

The company's next dividend payment will be €41.00 per share, and in the last 12 months, the company paid a total of €41.00 per share. Calculating the last year's worth of payments shows that Les Docks des Pétroles d'Ambès -SA has a trailing yield of 7.8% on the current share price of €525.00. If you buy this business for its dividend, you should have an idea of whether Les Docks des Pétroles d'Ambès -SA's dividend is reliable and sustainable. As a result, readers should always check whether Les Docks des Pétroles d'Ambès -SA has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Les Docks des Pétroles d'Ambès -SA

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year Les Docks des Pétroles d'Ambès -SA paid out 93% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 69% of its free cash flow as dividends, within the usual range for most companies.

It's good to see that while Les Docks des Pétroles d'Ambès -SA's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

Click here to see how much of its profit Les Docks des Pétroles d'Ambès -SA 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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Les Docks des Pétroles d'Ambès -SA, with earnings per share up 7.9% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Les Docks des Pétroles d'Ambès -SA has delivered 15% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Should investors buy Les Docks des Pétroles d'Ambès -SA for the upcoming dividend? Earnings per share have not grown all that much, and the company is paying out an uncomfortably high percentage of its income. Fortunately it paid out a lower percentage of its cash flow. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Les Docks des Pétroles d'Ambès -SA.

With that being said, if you're still considering Les Docks des Pétroles d'Ambès -SA as an investment, you'll find it beneficial to know what risks this stock is facing. For example, we've found 3 warning signs for Les Docks des Pétroles d'Ambès -SA that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.

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