Is It Smart To Buy Exacompta Clairefontaine S.A. (EPA:ALEXA) Before It Goes Ex-Dividend?

Exacompta Clairefontaine S.A. (EPA:ALEXA) is about to trade ex-dividend in the next 2 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. Therefore, if you purchase Exacompta Clairefontaine's shares on or after the 5th of June, you won't be eligible to receive the dividend, when it is paid on the 7th of June.

The company's next dividend payment will be €6.70 per share. Last year, in total, the company distributed €6.70 to shareholders. Looking at the last 12 months of distributions, Exacompta Clairefontaine has a trailing yield of approximately 3.9% on its current stock price of €170.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Exacompta Clairefontaine has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Exacompta Clairefontaine

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. Exacompta Clairefontaine is paying out just 18% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Exacompta Clairefontaine generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 6.8% 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 how much of its profit Exacompta Clairefontaine paid out over the last 12 months.

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. It's encouraging to see Exacompta Clairefontaine has grown its earnings rapidly, up 28% a year for the past five years. Exacompta Clairefontaine looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Exacompta Clairefontaine has delivered an average of 30% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Is Exacompta Clairefontaine worth buying for its dividend? We love that Exacompta Clairefontaine is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about Exacompta Clairefontaine, and we would prioritise taking a closer look at it.

Want to learn more about Exacompta Clairefontaine? Here's a visualisation of its historical rate of revenue and earnings growth.

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.