Vinci's (EPA:DG) Shareholders Will Receive A Bigger Dividend Than Last Year

Vinci SA (EPA:DG) will increase its dividend from last year's comparable payment on the 16th of November to €1.05. The payment will take the dividend yield to 4.0%, which is in line with the average for the industry.

Check out our latest analysis for Vinci

Vinci's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Vinci's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 17.1% over the next year. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.

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 annual payment during the last 10 years was €1.77 in 2013, and the most recent fiscal year payment was €4.05. This works out to be a compound annual growth rate (CAGR) of approximately 8.6% a year 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. Vinci might have put its house in order since then, but we remain cautious.

Vinci Could Grow Its 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. We are encouraged to see that Vinci has grown earnings per share at 9.6% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like Vinci's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Vinci that you should be aware of before investing. 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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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.