Compagnie de Saint-Gobain (EPA:SGO) Has Announced That It Will Be Increasing Its Dividend To €1.63

Compagnie de Saint-Gobain S.A. (EPA:SGO) will increase its dividend on the 8th of June to €1.63. This makes the dividend yield 3.0%, which is above the industry average.

View our latest analysis for Compagnie de Saint-Gobain

Compagnie de Saint-Gobain's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Compagnie de Saint-Gobain's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 19.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the first annual payment was €1.24, compared to the most recent full-year payment of €1.63. This means that it has been growing its distributions at 2.8% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Compagnie de Saint-Gobain has grown earnings per share at 15% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Compagnie de Saint-Gobain's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Compagnie de Saint-Gobain that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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