LACROIX Group's (EPA:LACR) Dividend Is Being Reduced To €0.80

LACROIX Group SA (EPA:LACR) has announced that on 13th of July, it will be paying a dividend of€0.80, which a reduction from last year's comparable dividend. Despite the cut, the dividend yield of 2.4% will still be comparable to other companies in the industry.

View our latest analysis for LACROIX Group

LACROIX Group's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, LACROIX Group was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 140.0%. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the dividend has gone from €0.50 total annually to €0.80. This means that it has been growing its distributions at 4.8% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings has been rising at 2.8% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, LACROIX Group could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On LACROIX Group's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for LACROIX Group (1 is potentially serious!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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