Should Income Investors Look At Vranken-Pommery Monopole Société Anonyme (EPA:VRAP) Before Its Ex-Dividend?

Vranken-Pommery Monopole Société Anonyme (EPA:VRAP) stock is about to trade ex-dividend in 3 days. The ex-dividend date is usually set to be one business day 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Vranken-Pommery Monopole Société Anonyme's shares on or after the 23rd of September will not receive the dividend, which will be paid on the 25th of September.

The company's upcoming dividend is €0.80 a share, following on from the last 12 months, when the company distributed a total of €0.80 per share to shareholders. Based on the last year's worth of payments, Vranken-Pommery Monopole Société Anonyme has a trailing yield of 5.5% on the current stock price of €14.60. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Vranken-Pommery Monopole Société Anonyme

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. Vranken-Pommery Monopole Société Anonyme paid out 133% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance. 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. Over the last year it paid out 59% of its free cash flow as dividends, within the usual range for most companies.

It's good to see that while Vranken-Pommery Monopole Société Anonyme's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. 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 Vranken-Pommery Monopole Société Anonyme, with earnings per share up 9.4% on average over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Vranken-Pommery Monopole Société Anonyme's dividend payments are broadly unchanged compared to where they were 10 years ago.

The Bottom Line

Should investors buy Vranken-Pommery Monopole Société Anonyme for the upcoming dividend? While earnings per share have been growing slowly, Vranken-Pommery Monopole Société Anonyme is paying out an uncomfortably high percentage of its earnings. However it did pay out a lower percentage of its cashflow. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

Although, if you're still interested in Vranken-Pommery Monopole Société Anonyme and want to know more, you'll find it very useful to know what risks this stock faces. To help with this, we've discovered 3 warning signs for Vranken-Pommery Monopole Société Anonyme (1 shouldn't be ignored!) that you ought to be aware of before buying the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.