Only Three Days Left To Cash In On Bonduelle's (EPA:BON) Dividend

Bonduelle SCA (EPA:BON) stock is about to trade ex-dividend in 3 days. Ex-dividend means that investors that purchase the stock on or after the 5th of January will not receive this dividend, which will be paid on the 7th of January.

Bonduelle's next dividend payment will be €0.40 per share, on the back of last year when the company paid a total of €0.40 to shareholders. Calculating the last year's worth of payments shows that Bonduelle has a trailing yield of 1.9% on the current share price of €20.8. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Bonduelle has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Bonduelle

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. Bonduelle has a low and conservative payout ratio of just 23% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 20% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Bonduelle's earnings per share have dropped 5.6% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Bonduelle has delivered an average of 0.6% per year annual increase in its dividend, based on the past 10 years of dividend payments.

The Bottom Line

Has Bonduelle got what it takes to maintain its dividend payments? Bonduelle has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Bonduelle's dividend merits.

In light of that, while Bonduelle has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 1 warning sign with Bonduelle and understanding them should be part of your investment process.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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