Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA:ML) Is Increasing Its Dividend To €1.35

The board of Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA:ML) has announced that it will be paying its dividend of €1.35 on the 24th of May, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 3.8%, which is fairly typical for the industry.

Check out our latest analysis for Compagnie Générale des Établissements Michelin Société en commandite par actions

Compagnie Générale des Établissements Michelin Société en commandite par actions' Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Compagnie Générale des Établissements Michelin Société en commandite par actions' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 38.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was €0.60 in 2014, and the most recent fiscal year payment was €1.35. This works out to be a compound annual growth rate (CAGR) of approximately 8.4% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Compagnie Générale des Établissements Michelin Société en commandite par actions might have put its house in order since then, but we remain cautious.

Compagnie Générale des Établissements Michelin Société en commandite par actions May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings have grown at around 3.6% a year for the past five years, which isn't massive but still better than seeing them shrink. Compagnie Générale des Établissements Michelin Société en commandite par actions is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Compagnie Générale des Établissements Michelin Société en commandite par actions that you should be aware of before investing. Is Compagnie Générale des Établissements Michelin Société en commandite par actions not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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