Know This Before Buying Cnl Capital E.K.E.S. - AIFM (ATH:CNLCAP) For Its Dividend

Is Cnl Capital E.K.E.S. - AIFM (ATH:CNLCAP) a good dividend stock? How can we tell? Dividend paying companies with growing earnings can be highly rewarding in the long term. If you are hoping to live on your dividends, it's important to be more stringent with your investments than the average punter. Regular readers know we like to apply the same approach to each dividend stock, and we hope you'll find our analysis useful.

In this case, Cnl Capital E.K.E.S. - AIFM pays a decent-sized 4.0% dividend yield, and has been distributing cash to shareholders for the past two years. It's certainly an attractive yield, but readers are likely curious about its staying power. The company also bought back stock during the year, equivalent to approximately 2.6% of the company's market capitalisation at the time. Some simple analysis can reduce the risk of holding Cnl Capital E.K.E.S. - AIFM for its dividend, and we'll focus on the most important aspects below.

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Payout ratios

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. So we need to form a view on if a company's dividend is sustainable, relative to its net profit after tax. Looking at the data, we can see that 1,248% of Cnl Capital E.K.E.S. - AIFM's profits were paid out as dividends in the last 12 months. 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 Cnl Capital E.K.E.S. - AIFM's financial position here.

Dividend Volatility

From the perspective of an income investor who wants to earn dividends for many years, there is not much point buying a stock if its dividend is regularly cut or is not reliable. The dividend has not fluctuated much, but with a relatively short payment history, we can't be sure this is sustainable across a full market cycle. During the past two-year period, the first annual payment was €0.1 in 2019, compared to €0.3 last year. Dividends per share have grown at approximately 64% per year over this time.

Cnl Capital E.K.E.S. - AIFM has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Dividend Growth Potential

Dividend payments have been consistent over the past few years, but we should always check if earnings per share (EPS) are growing, as this will help maintain the purchasing power of the dividend. Over the past three years, it looks as though Cnl Capital E.K.E.S. - AIFM's EPS have declined at around 52% a year. With this kind of significant decline, we always wonder what has changed in the business. Dividends are about stability, and Cnl Capital E.K.E.S. - AIFM's earnings per share, which support the dividend, have been anything but stable.

Conclusion

To summarise, shareholders should always check that Cnl Capital E.K.E.S. - AIFM's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. First, it's not great to see how much of its earnings are being paid as dividends. Earnings per share are down, and to our mind Cnl Capital E.K.E.S. - AIFM has not been paying a dividend long enough to demonstrate its resilience across economic cycles. With any dividend stock, we look for a sustainable payout ratio, steady dividends, and growing earnings. Cnl Capital E.K.E.S. - AIFM has a few too many issues for us to get interested.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for Cnl Capital E.K.E.S. - AIFM (of which 1 makes us a bit uncomfortable!) you should know about.

If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 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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