Bouygues' (EPA:EN) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Bouygues SA (EPA:EN) has announced that it will be increasing its dividend on the 5th of May to €1.80. This takes the dividend yield from 5.6% to 5.6%, which shareholders will be pleased with.

See our latest analysis for Bouygues

Bouygues' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Bouygues was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 6.8%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 66%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Bouygues Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the first annual payment was €1.60, compared to the most recent full-year payment of €1.80. This works out to be a compound annual growth rate (CAGR) of approximately 1.2% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Bouygues has impressed us by growing EPS at 7.0% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like Bouygues' Dividend

Overall, a dividend increase is always good, and we think that Bouygues is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 12 analysts we track are forecasting for Bouygues for free with public analyst estimates for the company. 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.