Stock Analysis

Compagnie Générale des Établissements Michelin Société en commandite par actions' (EPA:ML) Upcoming Dividend Will Be Larger Than Last Year's

ENXTPA:ML
Source: Shutterstock

Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA:ML) has announced that it will be increasing its dividend from last year's comparable payment on the 23rd of May to €1.38. Based on this payment, the dividend yield for the company will be 4.6%, which is fairly typical for the industry.

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Compagnie Générale des Établissements Michelin Société en commandite par actions' Future Dividend Projections Appear Well Covered By Earnings

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 a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 54.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% by next year, which is in a pretty sustainable range.

historic-dividend
ENXTPA:ML Historic Dividend April 19th 2025

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

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from €0.625 total annually to €1.38. This works out to be a compound annual growth rate (CAGR) of approximately 8.2% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Compagnie Générale des Établissements Michelin Société en commandite par actions' EPS was effectively flat over the past five years, which could stop the company from paying more every year. Growth of 1.9% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. 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. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Compagnie Générale des Établissements Michelin Société en commandite par actions that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

About ENXTPA:ML

Compagnie Générale des Établissements Michelin Société en commandite par actions

Engages in the manufacture and sale of tires worldwide.

Flawless balance sheet average dividend payer.

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