Should You Buy COFACE SA (EPA:COFA) For Its Upcoming Dividend?

COFACE SA (EPA:COFA) stock is about to trade ex-dividend in 3 days. The ex-dividend date is usually set to be two business days 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase COFACE's shares on or after the 20th of May will not receive the dividend, which will be paid on the 22nd of May.

The company's upcoming dividend is €1.40 a share, following on from the last 12 months, when the company distributed a total of €1.40 per share to shareholders. Calculating the last year's worth of payments shows that COFACE has a trailing yield of 8.1% on the current share price of €17.27. If you buy this business for its dividend, you should have an idea of whether COFACE's dividend is reliable and sustainable. So we need to investigate whether COFACE can afford its dividend, and if the dividend could grow.

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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. It paid out 82% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

See our latest analysis for COFACE

Click here to see how much of its profit COFACE paid out over the last 12 months.

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. For this reason, we're glad to see COFACE's earnings per share have risen 12% per annum 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. COFACE has delivered 13% dividend growth per year on average over the past nine years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is COFACE an attractive dividend stock, or better left on the shelf? Earnings per share are growing nicely, and COFACE is paying out a percentage of its earnings that is around the average for dividend-paying stocks. Overall, COFACE looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

On that note, you'll want to research what risks COFACE is facing. To that end, you should learn about the 2 warning signs we've spotted with COFACE (including 1 which is potentially serious).

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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.