It may not be a good idea to buy Électricité de Strasbourg Société Anonyme (EPA:ELEC) for its next dividend
Looks like Electricity of Strasbourg Société Anonyme (EPA:ELEC) is set to go ex-dividend in the next three days. The ex-dividend date occurs one day before the record date which is the day shareholders must be on the books of the company to receive a dividend. The ex-dividend date is important because each time a stock is bought or sold, the transaction takes at least two business days to settle. This means that investors who buy shares of Electricité de Strasbourg Société Anonyme from May 30 will not receive the dividend, which will be paid on June 1.
The company’s next dividend is €5.80 per share, after the last 12 months, when the company distributed a total of €5.80 per share to shareholders. Calculating the value of last year’s payouts shows that Electricité de Strasbourg Société Anonyme has a rolling yield of 5.6% on the current share price of €104.5. We love to see companies pay out a dividend, but it’s also important to make sure that laying the golden eggs doesn’t kill our golden hen! As a result, readers should always check whether Electricité de Strasbourg Société Anonyme was able to increase its dividend, or whether the dividend could be reduced.
Discover our latest analyzes for Electricité de Strasbourg Société Anonyme
If a company pays out more dividends than it has earned, the dividend may become unsustainable – a less than ideal situation. Electricité de Strasbourg Société Anonyme pays an acceptable 71% of its profits, a level of payment common to most companies. That said, even very profitable companies can sometimes not generate enough cash to pay the dividend, so we should always check if the dividend is covered by cash flow. Over the past year, it has paid out 50% of its free cash flow as dividends, within the usual range for most companies.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This generally suggests that the dividend is sustainable, as long as earnings don’t drop precipitously.
Click here to see how much of its profits Électricité de Strasbourg Société Anonyme has paid out over the past 12 months.
Have earnings and dividends increased?
Companies with declining profits are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is cut, expect a stock to sell heavily at the same time. We are therefore not pleased that the revenues of Electricité de Strasbourg Société Anonyme have fallen by 4.3% per year over the past five years.
Another key way to gauge a company’s dividend outlook is to measure its historical rate of dividend growth. Dividend payments per share of Electricité de Strasbourg Société Anonyme have fallen by 0.5% per year on average over the past 10 years, which is not encouraging.
Is Electricité de Strasbourg Société Anonyme worth buying for its dividend? While earnings per share are declining, it is encouraging to see that at least Electricité de Strasbourg Société Anonyme’s dividend looks sustainable, with earnings and cash payout ratios within reasonable limits. It’s not an attractive combination from a dividend perspective, and we’re inclined to drop this one for now.
That said, if you look at this title without worrying too much about the dividend, you should still be aware of the risks incurred by Électricité de Strasbourg Société Anonyme. Every business has risks, and we’ve spotted 1 warning sign for Electricité de Strasbourg Société Anonyme you should know.
As a general rule, we don’t recommend simply buying the first dividend-paying stock you see. Here is a curated list of attractive stocks that are strong dividend payers.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.