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Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, Laurent-Perrier SA (EPA:LPE) has paid a dividend to shareholders. It currently yields 1.1%. Let’s dig deeper into whether Laurent-Perrier should have a place in your portfolio.

Check out our latest analysis for Laurent-Perrier

5 checks you should use to assess a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Does it pay an annual yield higher than 75% of dividend payers?

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

• Has it increased its dividend per share amount over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Will it have the ability to keep paying its dividends going forward?

How well does Laurent-Perrier fit our criteria?

The company currently pays out 30% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 27%, leading to a dividend yield of 1.3%. However, EPS should increase to €3.9, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Dividend payments from Laurent-Perrier 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.

Relative to peers, Laurent-Perrier produces a yield of 1.1%, which is on the low-side for Beverage stocks.

Next Steps:

Now you know to keep in mind the reason why investors should be careful investing in Laurent-Perrier 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 recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three essential aspects you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for LPE’s future growth? Take a look at our free research report of analyst consensus for LPE’s outlook.

2. Valuation: What is LPE worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether LPE is currently mispriced by the market.

3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.