Compagnie Générale des Établissements Michelin Société en commandite par actions' (EPA:ML) Dividend Will Be Increased To €4.50

Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA:ML) has announced that it will be increasing its dividend on the 19th of May to €4.50. This takes the annual payment to 3.9% of the current stock price, which is about average for the industry.

View 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 a dividend to be consistent over the long term, so checking whether it is sustainable is important. 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 indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 18.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the first annual payment was €2.10, compared to the most recent full-year payment of €4.50. This means that it has been growing its distributions at 7.9% per annum 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

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, Compagnie Générale des Établissements Michelin Société en commandite par actions has only grown its earnings per share at 2.3% per annum over the past five years. Growth of 2.3% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This could mean the dividend doesn't have the growth potential we look for going into 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. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. For instance, we've picked out 2 warning signs 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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