Thales' (EPA:HO) Upcoming Dividend Will Be Larger Than Last Year's

Thales S.A. (EPA:HO) has announced that it will be increasing its dividend from last year's comparable payment on the 22nd of May to €2.85. This takes the annual payment to 1.5% of the current stock price, which is about average for the industry.

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 Thales' stock price has increased by 70% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Thales' Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last payment made up 75% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 103.7% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 41% which brings it into quite a comfortable range.

Check out our latest analysis for Thales

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from €1.12 total annually to €3.70. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Thales 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.

Thales May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Thales' EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Thales' Dividend

Overall, we always like to see the dividend being raised, but we don't think Thales will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.