Compagnie de Saint-Gobain's (EPA:SGO) Shareholders Will Receive A Bigger Dividend Than Last Year

Compagnie de Saint-Gobain S.A. (EPA:SGO) has announced that it will be increasing its dividend on the 8th of June to €1.63, which will be 23% higher than last year. This takes the dividend yield from 2.6% to 3.2%, which shareholders will be pleased with.

See our latest analysis for Compagnie de Saint-Gobain

Compagnie de Saint-Gobain's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, Compagnie de Saint-Gobain's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 16.4%. 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

While the company has been paying a dividend for a long time, it has cut the dividend 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 €1.33. Dividend payments have grown at less than 1% a year over this period. 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. Compagnie de Saint-Gobain has impressed us by growing EPS at 15% per year over the past five years. 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

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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. As an example, we've identified 2 warning signs for Compagnie de Saint-Gobain that you should be aware of before investing. 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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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.