Dassault Aviation Société anonyme (EPA:AM) Is Paying Out Less In Dividends Than Last Year

By
Simply Wall St
Published
May 12, 2022
ENXTPA:AM
Source: Shutterstock

Dassault Aviation Société anonyme (EPA:AM) has announced it will be reducing its dividend payable on the 25th of May to €2.49. The yield is still above the industry average at 1.6%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Dassault Aviation Société anonyme's stock price has increased by 35% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Dassault Aviation Société anonyme

Dassault Aviation Société anonyme's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Dassault Aviation Société anonyme's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 7.4% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 40%, which we are pretty comfortable with and we think is feasible on an earnings basis.

historic-dividend
ENXTPA:AM Historic Dividend May 12th 2022

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from €0.85 in 2012 to the most recent annual payment of €2.49. This means that it has been growing its distributions at 11% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

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. We are encouraged to see that Dassault Aviation Société anonyme has grown earnings per share at 10% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Dassault Aviation Société anonyme Looks Like A Great Dividend Stock

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Dassault Aviation Société anonyme has the makings of a solid income stock moving forward. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Dassault Aviation Société anonyme that investors need to be conscious of moving forward. Is Dassault Aviation Société anonyme not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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