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

The board of Société Générale Société anonyme (EPA:GLE) has announced that it will be paying its dividend of €1.70 on the 1st of June, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 7.1%.

Check out our latest analysis for Société Générale Société anonyme

Société Générale Société anonyme's 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.

Société Générale Société anonyme has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Although the company has a long history in paying out dividends, Société Générale Société anonyme's latest earnings report shows a payout ratio of 98%. This figure could be worrying with regards to the sustainability of the company's dividends, as earnings just barely cover its dividend payments.

Over the next 3 years, EPS is forecast to expand by 6.0%. Despite the current payout ratio being slightly elevated, analysts estimate the future payout ratio will be 36% over the same time period, which would make us comfortable with the sustainability of the dividend.

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 means that it has been growing its distributions at 14% per annum 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 Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Société Générale Société anonyme's EPS has declined at around 10% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

The Dividend Could Prove To Be Unreliable

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 don't think Société Générale Société anonyme is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Société Générale Société anonyme 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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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.