Compagnie de Saint-Gobain S.A. (EPA:SGO) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Compagnie de Saint-Gobain S.A. (EPA:SGO) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Compagnie de Saint-Gobain's shares before the 10th of June in order to be eligible for the dividend, which will be paid on the 12th of June.

The company's next dividend payment will be €2.10 per share, on the back of last year when the company paid a total of €2.10 to shareholders. Calculating the last year's worth of payments shows that Compagnie de Saint-Gobain has a trailing yield of 2.6% on the current share price of €80.76. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Compagnie de Saint-Gobain has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Compagnie de Saint-Gobain

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Compagnie de Saint-Gobain paying out a modest 40% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Luckily it paid out just 25% of its free cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Compagnie de Saint-Gobain has grown its earnings rapidly, up 49% a year for the past five years. Compagnie de Saint-Gobain is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Compagnie de Saint-Gobain has delivered 5.4% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Compagnie de Saint-Gobain is keeping back more of its profits to grow the business.

To Sum It Up

Has Compagnie de Saint-Gobain got what it takes to maintain its dividend payments? It's great that Compagnie de Saint-Gobain is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Compagnie de Saint-Gobain, and we would prioritise taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 1 warning sign for Compagnie de Saint-Gobain that you should be aware of before investing in their shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.