Could Focus Home Interactive Société anonyme (EPA:ALFOC) be an attractive dividend share to own for the long haul? Investors are often drawn to strong companies with the idea of reinvesting the dividends. 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.
With a 3.0% yield and a five-year payment history, investors probably think Focus Home Interactive Société anonyme looks like a reliable dividend stock. A low yield is generally a turn-off, but if the prospects for earnings growth were strong, investors might be pleasantly surprised by the long-term results. When buying stocks for their dividends, you should always run through the checks below, to see if the dividend looks sustainable.
Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. As a result, we should always investigate whether a company can afford its dividend, measured as a percentage of a company's net income after tax. Focus Home Interactive Société anonyme paid out 44% of its profit as dividends, over the trailing twelve month period. This is a medium payout level that leaves enough capital in the business to fund opportunities that might arise, while also rewarding shareholders. Plus, there is room to increase the payout ratio over time.
While the above analysis focuses on dividends relative to a company's earnings, we do note Focus Home Interactive Société anonyme's strong net cash position, which will let it pay larger dividends for a time, should it choose.
Remember, you can always get a snapshot of Focus Home Interactive Société anonyme's latest financial position, by checking our visualisation of its financial health.
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. Looking at the data, we can see that Focus Home Interactive Société anonyme has been paying a dividend for the past five years. During the past five-year period, the first annual payment was €0.40 in 2015, compared to €0.68 last year. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time.
We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
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. Strong earnings per share (EPS) growth might encourage our interest in the company despite fluctuating dividends, which is why it's great to see Focus Home Interactive Société anonyme has grown its earnings per share at 14% per annum over the past five years. A company paying out less than a quarter of its earnings as dividends, and growing earnings at more than 10% per annum, looks to be right in the cusp of its growth phase. At the right price, we might be interested.
To summarise, shareholders should always check that Focus Home Interactive Société anonyme's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. We're glad to see Focus Home Interactive Société anonyme has a low payout ratio, as this suggests earnings are being reinvested in the business. We were also glad to see it growing earnings, although its dividend history is not as long as we'd like. Focus Home Interactive Société anonyme has a credible record on several fronts, but falls slightly short of our standards for a dividend stock.
Earnings growth generally bodes well for the future value of company dividend payments. See if the 4 Focus Home Interactive Société anonyme analysts we track are forecasting continued growth with our free report on analyst estimates for the company.
If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 3%.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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