Thales (EPA:HO) Is Due To Pay A Dividend Of €0.95

The board of Thales S.A. (EPA:HO) has announced that it will pay a dividend of €0.95 per share on the 4th of December. This will take the annual payment to 1.5% of the stock price, which is above what most companies in the industry pay.

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Thales' Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Thales 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.

Over the next year, EPS is forecast to expand by 112.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.

View our latest analysis for Thales

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was €1.12 in 2015, and the most recent fiscal year payment was €3.70. This means that it has been growing its distributions at 13% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Thales has impressed us by growing EPS at 11% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Thales Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Thales that investors need to be conscious of moving forward. 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.