A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. In the last few years Maisons du Monde S.A. (EPA:MDM) has paid a dividend to shareholders. Today it yields 2.0%. Should it have a place in your portfolio? Let’s take a look at Maisons du Monde in more detail.
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is their annual yield among the top 25% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How does Maisons du Monde fare?
The company currently pays out 31% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 33% which, assuming the share price stays the same, leads to a dividend yield of 2.8%. Moreover, EPS should increase to €1.66.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view Maisons du Monde as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Maisons du Monde produces a yield of 2.0%, which is on the low-side for Specialty Retail stocks.
If you are building an income portfolio, then Maisons du Monde is a complicated choice since it has some positive aspects as well as negative ones. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three fundamental factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for MDM’s future growth? Take a look at our free research report of analyst consensus for MDM’s outlook.
- Valuation: What is MDM worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MDM is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.