Eiffage's (EPA:FGR) Dividend Will Be Increased To €4.70

Eiffage SA's (EPA:FGR) dividend will be increasing from last year's payment of the same period to €4.70 on 23rd of May. This takes the annual payment to 4.4% of the current stock price, which is about average for the industry.

Check out our latest analysis for Eiffage

Eiffage's Projected Earnings Seem Likely To Cover Future Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Eiffage was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 12.6%. 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

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was €1.20, compared to the most recent full-year payment of €4.70. This means that it has been growing its distributions at 15% per annum over that time. Eiffage 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.

We Could See Eiffage's Dividend Growing

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. It's encouraging to see that Eiffage has been growing its earnings per share at 7.8% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Our Thoughts On Eiffage's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. Taking the debate a bit further, we've identified 2 warning signs for Eiffage that investors need to be conscious of moving forward. Is Eiffage not quite the opportunity you were looking for? Why not check out our selection of top 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.