Legrand (EPA:LR) Is Paying Out A Larger Dividend Than Last Year

Legrand SA (EPA:LR) will increase its dividend on the 1st of June to €1.65. The announced payment will take the dividend yield to 2.0%, which is in line with the average for the industry.

Check out our latest analysis for Legrand

Legrand's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend was quite easily covered by Legrand's earnings. 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 7.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 47% by next year, which is in a pretty sustainable range.

Legrand Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The first annual payment during the last 10 years was €0.93 in 2012, and the most recent fiscal year payment was €1.65. This implies that the company grew its distributions at a yearly rate of about 5.9% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Legrand Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Legrand has impressed us by growing EPS at 7.5% per 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.

We Really Like Legrand's Dividend

Overall, a dividend increase is always good, and we think that Legrand is a strong income stock thanks to its track record and growing earnings. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 20 analysts we track are forecasting for Legrand for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.