Is it smart to buy Verallia Société Anonyme (EPA: VRLA) before it becomes ex-dividend?

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It looks like Verallia Société Anonyme (EPA: VRLA) is set to be ex-dividend within the next 3 days. The ex-dividend date occurs one day before the registration date which is the day on which shareholders must be entered in the books of the company to receive a dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you would not appear on the company’s books on the date of registration. Thus, you can buy Verallia Société Anonyme shares before July 1 in order to receive the dividend that the company will pay on July 5.

The company’s next dividend will be € 0.95 per share, and over the past 12 months the company has paid a total of € 0.95 per share. The calculation of the value of last year’s payments shows that Verallia Société Anonyme has a sliding return of 3.0% on the current price of € 31.58. Dividends are a major contributor to returns on investment for long-term holders, but only if the dividend continues to be paid. We must therefore ask ourselves if Verallia Société Anonyme can afford its dividend, and if the dividend could grow.

See our latest analysis for Verallia Société Anonyme

Dividends are usually paid out of the company’s profits, so if a company pays more than it earned, its dividend is usually at risk of being reduced. Verallia Société Anonyme paid out more than half (57%) of its profits last year, which is a steady payout rate for most companies. A useful secondary check may be to assess whether Verallia Société Anonyme has generated sufficient free cash flow to pay its dividend. The good news is that she only paid 3.7% of her free cash flow last year.

It is positive to see that the dividend from Verallia Société Anonyme is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout rate usually suggests a higher large safety margin before the dividend is cut.

Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.

ENXTPA: VRLA Historical Dividend June 27, 2021

Have profits and dividends increased?

Companies with strong growth prospects generally make the best dividend payers because dividends are easier to grow when earnings per share improve. If profits fall enough, the company could be forced to cut its dividend. This is why it is heartwarming to see Verallia Société Anonyme’s revenues explode, up 56% per year for the past five years. Management seems to strike a good balance between reinvesting for growth and paying dividends to shareholders. Earnings per share have grown rapidly, and in combination with some reinvestment and an average payout ratio, the stock may have decent dividend prospects going forward.

Since Verallia Société Anonyme has only paid a dividend for a year, there is not much history to build on.

To summarize

Is Verallia Société Anonyme an attractive dividend-paying share, or better left on the shelf? We like the growth in earnings per share of Verallia Société Anonyme and the fact that, while its payout ratio is average, it has distributed a lower percentage of its cash flow. Verallia Société Anonyme looks solid on this analysis overall, and we would certainly consider taking it further.

So, while Verallia Société Anonyme looks great from a dividend point of view, it is always worth being aware of the risks associated with this stock. In terms of investment risks, we have identified 3 warning signs with Verallia Société Anonyme and understanding them should be part of your investment process.

However, we don’t recommend simply buying the first dividend stock you see. Here is a list of interesting dividend stocks with a yield above 2% and a dividend coming soon.

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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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