U.S. markets closed
  • S&P 500

    4,247.44
    +8.26 (+0.19%)
     
  • Dow 30

    34,479.60
    +13.40 (+0.04%)
     
  • Nasdaq

    14,069.42
    +49.12 (+0.35%)
     
  • Russell 2000

    2,335.81
    +24.40 (+1.06%)
     
  • Crude Oil

    70.78
    +0.49 (+0.70%)
     
  • Gold

    1,879.50
    -16.90 (-0.89%)
     
  • Silver

    28.05
    +0.02 (+0.07%)
     
  • EUR/USD

    1.2107
    -0.0071 (-0.58%)
     
  • 10-Yr Bond

    1.4620
    +0.0030 (+0.21%)
     
  • GBP/USD

    1.4117
    -0.0060 (-0.42%)
     
  • USD/JPY

    109.6350
    +0.2870 (+0.26%)
     
  • BTC-USD

    37,412.46
    +1,485.04 (+4.13%)
     
  • CMC Crypto 200

    924.19
    -17.62 (-1.87%)
     
  • FTSE 100

    7,134.06
    +45.88 (+0.65%)
     
  • Nikkei 225

    28,948.73
    -9.87 (-0.03%)
     

Legrand SA (EPA:LR) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·4 min read
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Legrand SA (EPA:LR) stock is about to trade ex-dividend in 4 days time. If you purchase the stock on or after the 1st of June, you won't be eligible to receive this dividend, when it is paid on the 3rd of June.

Legrand's next dividend payment will be €1.34 per share. Last year, in total, the company distributed €1.42 to shareholders. Calculating the last year's worth of payments shows that Legrand has a trailing yield of 2.4% on the current share price of €60.38. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Legrand

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Legrand paid out a comfortable 47% of its profit last year. 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. Fortunately, it paid out only 33% of its free cash flow in the past year.

It's positive to see that Legrand's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

ENXTPA:LR Historical Dividend Yield May 27th 2020
ENXTPA:LR Historical Dividend Yield May 27th 2020

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Legrand earnings per share are up 8.7% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past ten years, Legrand has increased its dividend at approximately 7.3% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Legrand an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and Legrand is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Legrand is being conservative with its dividend payouts and could still perform reasonably over the long run. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while Legrand has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 2 warning signs for Legrand and you should be aware of them before buying any shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.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. 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. Thank you for reading.