BNP Paribas (EPA:BNP) Is Paying Out A Larger Dividend Than Last Year

The board of BNP Paribas SA (EPA:BNP) has announced that it will be paying its dividend of €4.79 on the 21st of May, an increased payment from last year's comparable dividend. This takes the annual payment to 6.1% of the current stock price, which is about average for the industry.

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BNP Paribas' Earnings Will Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Having distributed dividends for at least 10 years, BNP Paribas has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 50%, which means that BNP Paribas would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 26.4% over the next 3 years. Analysts estimate the future payout ratio will be 52% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for BNP Paribas

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 dividend has gone from an annual total of €1.50 in 2015 to the most recent total annual payment of €4.79. This means that it has been growing its distributions at 12% per annum over that time. BNP Paribas has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

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. BNP Paribas has impressed us by growing EPS at 11% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

BNP Paribas Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for BNP Paribas that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.