Should Income Investors Look At Aeroports de Paris SA (EPA:ADP) Before Its Ex-Dividend?

Aeroports de Paris SA (EPA:ADP) stock is about to trade ex-dividend in 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Aeroports de Paris investors that purchase the stock on or after the 10th of June will not receive the dividend, which will be paid on the 12th of June.

The company's next dividend payment will be €3.82 per share, on the back of last year when the company paid a total of €3.82 to shareholders. Last year's total dividend payments show that Aeroports de Paris has a trailing yield of 2.9% on the current share price of €129.80. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Aeroports de Paris

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. Aeroports de Paris paid out more than half (60%) of its earnings last year, which is a regular payout ratio for most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Dividends consumed 58% 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 Aeroports de Paris'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.

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 Aeroports de Paris earnings per share are up 4.5% per annum over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Aeroports de Paris has delivered 7.5% dividend growth per year on average over the past 10 years. 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.

To Sum It Up

Is Aeroports de Paris worth buying for its dividend? Earnings per share have been growing modestly and Aeroports de Paris paid out a bit over half of its earnings and free cash flow last year. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

With that being said, if dividends aren't your biggest concern with Aeroports de Paris, you should know about the other risks facing this business. Every company has risks, and we've spotted 2 warning signs for Aeroports de Paris (of which 1 shouldn't be ignored!) you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.