Safran's (EPA:SAF) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Safran SA (EPA:SAF) has announced that it will be paying its dividend of €2.90 on the 2nd of June, an increased payment from last year's comparable dividend. This takes the annual payment to 1.2% of the current stock price, which is about average for the industry.

Safran's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Safran's Could Struggle to Maintain Dividend Payments In The Future

Safran's Future Dividends May Potentially Be At Risk

Unless the payments are sustainable, the dividend yield doesn't mean too much. Even though Safran isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

EPS is forecast to rise very quickly over the next 12 months. If recent patterns in the dividend continues, we would start to get a bit worried, with the payout ratio possibly reaching 182%.

Check out our latest analysis for Safran

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 €1.12, compared to the most recent full-year payment of €2.90. This means that it has been growing its distributions at 10.0% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Safran 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. Earnings per share has been crawling upwards at 3.9% per year. With EPS growth hard to come by and the company not turning a profit, we wouldn't be particularly optimistic about the growth prospects for Safran's dividend in the future.

Our Thoughts On Safran's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Safran's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 14 analysts we track are forecasting for Safran 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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