Readers hoping to buy Etn. Fr. Colruyt NV (EBR:COLR) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 27th of September to receive the dividend, which will be paid on the 1st of October.
Etn. Fr. Colruyt's next dividend payment will be €0.9 per share, on the back of last year when the company paid a total of €1.3 to shareholders. Last year's total dividend payments show that Etn. Fr. Colruyt has a trailing yield of 2.8% on the current share price of €46.93. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Etn. Fr. Colruyt can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Etn. Fr. Colruyt paying out a modest 47% of its earnings. 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. It paid out 90% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Etn. Fr. Colruyt, with earnings per share up 4.4% on average over the last five years. A payout ratio of 47% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Etn. Fr. Colruyt has delivered an average of 5.0% per year annual increase in its dividend, based on the past ten years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Has Etn. Fr. Colruyt got what it takes to maintain its dividend payments? Earnings per share have been growing at a steady rate, and Etn. Fr. Colruyt paid out less than half its profits and more than half its free cash flow as dividends over the last year. All things considered, we are not particularly enthused about Etn. Fr. Colruyt from a dividend perspective.
Ever wonder what the future holds for Etn. Fr. Colruyt? See what the 12 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Thank you for reading.