Société Générale Société anonyme (EPA:GLE) Is Increasing Its Dividend To €1.70

Société Générale Société anonyme (EPA:GLE) will increase its dividend from last year's comparable payment on the 1st of June to €1.70. The payment will take the dividend yield to 6.1%, which is in line with the average for the industry.

Check out our latest analysis for Société Générale Société anonyme

Société Générale Société anonyme's Payment Expected To Have Solid Earnings Coverage

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, Société Générale Société anonyme has a long history of paying out a part of its earnings to shareholders. While having a long history of dividends is a good sign, Société Générale Société anonyme's latest earning reports show that its payout ratio - the ratio of the dividend amount to earnings - currently sits at 98%. This figure could be worrying with regards to the sustainability of the company's dividends, as earnings just barely cover its dividend payments.

Analysts expect a massive rise in earnings per share in the next 3 years. They also estimate the payout ratio reaching 35% in the same time period, which is fairly sustainable.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was €0.45 in 2013, and the most recent fiscal year payment was €1.70. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Société Générale Société anonyme 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.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Société Générale Société anonyme's EPS has declined at around 9.5% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Société Générale Société anonyme's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Société Générale Société anonyme will make a great income stock. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.

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 example, we've picked out 2 warning signs for Société Générale Société anonyme that investors should know about before committing capital to this stock. 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.