Legrand's (EPA:LR) Dividend Will Be Increased To €1.65

The board of Legrand SA (EPA:LR) has announced that it will be increasing its dividend on the 1st of June to €1.65. This makes the dividend yield about the same as the industry average at 2.1%.

View our latest analysis for Legrand

Legrand's Earnings Easily Cover the Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Legrand's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 8.5% over the next year. If the dividend continues on this path, the payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.

Legrand Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the dividend has gone from €0.93 to €1.65. This works out to be a compound annual growth rate (CAGR) of approximately 5.9% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Legrand has grown earnings per share 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. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. 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. Is Legrand 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.