Compagnie de Saint-Gobain (EPA:SGO) Is Increasing Its Dividend To €2.20

Compagnie de Saint-Gobain S.A. (EPA:SGO) has announced that it will be increasing its dividend from last year's comparable payment on the 11th of June to €2.20. Although the dividend is now higher, the yield is only 2.3%, which is below the industry average.

Compagnie de Saint-Gobain's Payment Could Potentially Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, Compagnie de Saint-Gobain's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 37.5%. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Compagnie de Saint-Gobain

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was €1.24 in 2015, and the most recent fiscal year payment was €2.20. This works out to be a compound annual growth rate (CAGR) of approximately 5.9% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Compagnie de Saint-Gobain might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Compagnie de Saint-Gobain has seen EPS rising for the last five years, at 17% per annum. Compagnie de Saint-Gobain definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Compagnie de Saint-Gobain Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Compagnie de Saint-Gobain that investors need to be conscious of moving forward. 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.