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

Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA:ML) will increase its dividend from last year's comparable payment on the 24th of May to €1.35. This makes the dividend yield about the same as the industry average at 3.6%.

See 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

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Compagnie Générale des Établissements Michelin Société en commandite par actions was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 38.5%. 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

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from €0.60 total annually to €1.35. This implies that the company grew its distributions at a yearly rate of about 8.4% over that duration. 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.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. 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 bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Compagnie Générale des Établissements Michelin Société en commandite par actions' Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Compagnie Générale des Établissements Michelin Société en commandite par actions that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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