Should Income Investors Look At Groupe Guillin S.A. (EPA:ALGIL) Before Its Ex-Dividend?

It looks like Groupe Guillin S.A. (EPA:ALGIL) is about to go ex-dividend in the next 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least 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 Groupe Guillin's shares on or after the 24th of June, you won't be eligible to receive the dividend, when it is paid on the 26th of June.

The company's next dividend payment will be €1.00 per share. Last year, in total, the company distributed €1.00 to shareholders. Based on the last year's worth of payments, Groupe Guillin has a trailing yield of 3.4% on the current stock price of €29.40. 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 Groupe Guillin has been able to grow its dividends, or if the dividend might be cut.

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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. Groupe Guillin paid out a comfortable 31% of its profit last year. A useful secondary check can be to evaluate whether Groupe Guillin generated enough free cash flow to afford its dividend. It paid out more than half (70%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Groupe Guillin'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.

View our latest analysis for Groupe Guillin

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 Groupe Guillin, with earnings per share up 5.5% on average over the last five years. Decent historical earnings per share growth suggests Groupe Guillin has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Groupe Guillin has lifted its dividend by approximately 10% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Has Groupe Guillin got what it takes to maintain its dividend payments? Earnings per share growth has been modest, and it's interesting that Groupe Guillin is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. 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.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To that end, you should learn about the 2 warning signs we've spotted with Groupe Guillin (including 1 which is concerning).

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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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.