Don't Race Out To Buy Société Marseillaise du Tunnel Prado Carénage (EPA:ALTPC) Just Because It's Going Ex-Dividend

Readers hoping to buy Société Marseillaise du Tunnel Prado Carénage (EPA:ALTPC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. Meaning, you will need to purchase Société Marseillaise du Tunnel Prado Carénage's shares before the 9th of July to receive the dividend, which will be paid on the 11th of July.

The company's next dividend payment will be €2.10 per share, and in the last 12 months, the company paid a total of €2.10 per share. Looking at the last 12 months of distributions, Société Marseillaise du Tunnel Prado Carénage has a trailing yield of approximately 7.3% on its current stock price of €28.60. 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.

View our latest analysis for Société Marseillaise du Tunnel Prado Carénage

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. Last year, Société Marseillaise du Tunnel Prado Carénage paid out 103% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. A useful secondary check can be to evaluate whether Société Marseillaise du Tunnel Prado Carénage generated enough free cash flow to afford its dividend. It paid out 89% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's good to see that while Société Marseillaise du Tunnel Prado Carénage's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.

Click here to see how much of its profit Société Marseillaise du Tunnel Prado Carénage paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that Société Marseillaise du Tunnel Prado Carénage's earnings are down 2.4% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Société Marseillaise du Tunnel Prado Carénage has lifted its dividend by approximately 1.0% a year on average.

Final Takeaway

Should investors buy Société Marseillaise du Tunnel Prado Carénage for the upcoming dividend? Earnings per share have been in decline, which is not encouraging. What's more, Société Marseillaise du Tunnel Prado Carénage is paying out a majority of its earnings and over half its free cash flow. It's hard to say if the business has the financial resources and time to turn things around without cutting the dividend. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

Although, if you're still interested in Société Marseillaise du Tunnel Prado Carénage and want to know more, you'll find it very useful to know what risks this stock faces. Case in point: We've spotted 2 warning signs for Société Marseillaise du Tunnel Prado Carénage you should be aware of.

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.

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