Why It Might Not Make Sense To Buy Société Marseillaise du Tunnel Prado Carénage (EPA:ALTPC) For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Société Marseillaise du Tunnel Prado Carénage (EPA:ALTPC) is about to go ex-dividend in just 3 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Therefore, if you purchase Société Marseillaise du Tunnel Prado Carénage's shares on or after the 2nd of June, you won't be eligible to receive the dividend, when it is paid on the 4th of June.

The company's upcoming dividend is €2.20 a share, following on from the last 12 months, when the company distributed a total of €2.20 per share to shareholders. 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 €30.00. 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! We need to see whether the dividend is covered by earnings and if it's growing.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

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. Société Marseillaise du Tunnel Prado Carénage distributed an unsustainably high 136% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 56% of its free cash flow as dividends, within the usual range for most companies.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Société Marseillaise du Tunnel Prado Carénage fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

See our latest analysis for Société Marseillaise du Tunnel Prado Carénage

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?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see Société Marseillaise du Tunnel Prado Carénage's earnings per share have been shrinking at 4.7% a year over the previous five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Société Marseillaise du Tunnel Prado Carénage has lifted its dividend by approximately 1.5% a year on average.

Final Takeaway

Is Société Marseillaise du Tunnel Prado Carénage an attractive dividend stock, or better left on the shelf? Earnings per share have been in decline, which is not encouraging. Additionally, Société Marseillaise du Tunnel Prado Carénage is paying out quite a high percentage of its earnings, and more than half its cash flow, so it's hard to evaluate whether the company is reinvesting enough in its business to improve its situation. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Société Marseillaise du Tunnel Prado Carénage. Every company has risks, and we've spotted 1 warning sign for Société Marseillaise du Tunnel Prado Carénage 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.