Compagnie de Saint-Gobain (EPA:SGO) Is Paying Out A Larger Dividend Than Last Year

Compagnie de Saint-Gobain S.A. (EPA:SGO) will increase its dividend from last year's comparable payment on the 12th of June to €2.10. Based on this payment, the dividend yield for the company will be 3.0%, which is fairly typical for the industry.

See our latest analysis for Compagnie de Saint-Gobain

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

Unless the payments are sustainable, the dividend yield doesn't mean too much. 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 what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 33.4% over the next year. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of €1.24 in 2014 to the most recent total annual payment of €2.10. This implies that the company grew its distributions at a yearly rate of about 5.4% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Compagnie de Saint-Gobain has been growing its earnings per share at 49% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Compagnie de Saint-Gobain's Dividend

Overall, a dividend increase is always good, and we think that Compagnie de Saint-Gobain 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. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Compagnie de Saint-Gobain that investors should take into consideration. Is Compagnie de Saint-Gobain not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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