How Does Société Marseillaise du Tunnel Prado Carénage (EPA:SMTPC) Fare As A Dividend Stock?

Today we'll take a closer look at Société Marseillaise du Tunnel Prado Carénage (EPA:SMTPC) from a dividend investor's perspective. Owning a strong business and reinvesting the dividends is widely seen as an attractive way of growing your wealth. If you are hoping to live on the income from dividends, it's important to be a lot more stringent with your investments than the average punter.

A high yield and a long history of paying dividends is an appealing combination for Société Marseillaise du Tunnel Prado Carénage. We'd guess that plenty of investors have purchased it for the income. That said, the recent jump in the share price will make Société Marseillaise du Tunnel Prado Carénage's dividend yield look smaller, even though the company prospects could be improving. When buying stocks for their dividends, you should always run through the checks below, to see if the dividend looks sustainable.

Explore this interactive chart for our latest analysis on Société Marseillaise du Tunnel Prado Carénage!

Payout ratios

Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. So we need to form a view on if a company's dividend is sustainable, relative to its net profit after tax. Société Marseillaise du Tunnel Prado Carénage paid out 160% of its profit as dividends, over the trailing twelve month period. A payout ratio above 100% is definitely an item of concern, unless there are some other circumstances that would justify it.

Consider getting our latest analysis on Société Marseillaise du Tunnel Prado Carénage's financial position here.

Dividend Volatility

One of the major risks of relying on dividend income, is the potential for a company to struggle financially and cut its dividend. Not only is your income cut, but the value of your investment declines as well - nasty. For the purpose of this article, we only scrutinise the last decade of Société Marseillaise du Tunnel Prado Carénage's dividend payments. This dividend has been unstable, which we define as having been cut one or more times over this time. During the past 10-year period, the first annual payment was €1.6 in 2011, compared to €1.9 last year. Dividends per share have grown at approximately 1.7% per year over this time. The growth in dividends has not been linear, but the CAGR is a decent approximation of the rate of change over this time frame.

It's good to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth, anyway. We're not that enthused by this.

Dividend Growth Potential

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. Société Marseillaise du Tunnel Prado Carénage's earnings per share have shrunk at 13% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective, as even conservative payout ratios can come under pressure if earnings fall far enough.

Conclusion

To summarise, shareholders should always check that Société Marseillaise du Tunnel Prado Carénage's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. Société Marseillaise du Tunnel Prado Carénage is paying out a larger percentage of its profit than we're comfortable with. Second, earnings per share have been in decline, and its dividend has been cut at least once in the past. With this information in mind, we think Société Marseillaise du Tunnel Prado Carénage may not be an ideal dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Société Marseillaise du Tunnel Prado Carénage (of which 1 shouldn't be ignored!) you should know about.

We have also put together a list of global stocks with a market capitalisation above $1bn and yielding more 3%.

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This article by Simply Wall St is general in nature. 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.
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