A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, Catering International & Services Société Anonyme (EPA:CTRG) has been paying a dividend to shareholders. Today it yields 1.1%. Let’s dig deeper into whether Catering International & Services Société Anonyme should have a place in your portfolio.
See our latest analysis for Catering International & Services Société Anonyme
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5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
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Does it pay an annual yield higher than 75% of dividend payers?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has dividend per share risen in the past couple of years?
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Can it afford to pay the current rate of dividends from its earnings?
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Will the company be able to keep paying dividend based on the future earnings growth?
How well does Catering International & Services Société Anonyme fit our criteria?
The company currently pays out 18% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect CTRG’s payout to remain around the same level at 19% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 1.4%. Furthermore, EPS is forecasted to fall to €0.57 in the upcoming year.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Dividend payments from Catering International & Services Société Anonyme have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.
In terms of its peers, Catering International & Services Société Anonyme has a yield of 1.1%, which is on the low-side for Commercial Services stocks.
Next Steps:
After digging a little deeper into Catering International & Services Société Anonyme’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three relevant aspects you should further examine: