L'Air Liquide S.A. (EPA:AI) Stock Goes Ex-Dividend In Just Four Days

By
Simply Wall St
Published
May 11, 2022
ENXTPA:AI
Source: Shutterstock

Readers hoping to buy L'Air Liquide S.A. (EPA:AI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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 L'Air Liquide's shares before the 16th of May in order to be eligible for the dividend, which will be paid on the 18th of May.

The company's next dividend payment will be €2.90 per share, on the back of last year when the company paid a total of €2.90 to shareholders. Based on the last year's worth of payments, L'Air Liquide stock has a trailing yield of around 1.8% on the current share price of €157.64. 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 investigate whether L'Air Liquide can afford its dividend, and if the dividend could grow.

See our latest analysis for L'Air Liquide

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. L'Air Liquide paid out more than half (53%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether L'Air Liquide generated enough free cash flow to afford its dividend. Dividends consumed 50% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that L'Air Liquide's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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

historic-dividend
ENXTPA:AI Historic Dividend May 11th 2022

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see L'Air Liquide earnings per share are up 5.4% per annum over the last five years. Decent historical earnings per share growth suggests L'Air Liquide has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, L'Air Liquide has lifted its dividend by approximately 5.4% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is L'Air Liquide worth buying for its dividend? Earnings per share have been growing modestly and L'Air Liquide paid out a bit over half of its earnings and free cash flow last year. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

So if you want to do more digging on L'Air Liquide, you'll find it worthwhile knowing the risks that this stock faces. For example, we've found 2 warning signs for L'Air Liquide that we recommend you consider before investing in the business.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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