S.A. Fountaine Pajot's (EPA:ALFPC) Upcoming Dividend Will Be Larger Than Last Year's

The board of S.A. Fountaine Pajot (EPA:ALFPC) has announced that the dividend on 25th of April will be increased to €2.52, which will be 15% higher than last year's payment of €2.20 which covered the same period. This takes the annual payment to 2.6% of the current stock price, which unfortunately is below what the industry is paying.

We've discovered 2 warning signs about S.A. Fountaine Pajot. View them for free.

S.A. Fountaine Pajot's Payment Could Potentially Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, S.A. Fountaine Pajot's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

EPS is set to fall by 66.8% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 43%, which is comfortable for the company to continue in the future.

See our latest analysis for S.A. Fountaine Pajot

S.A. Fountaine Pajot Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the dividend has gone from €0.30 total annually to €2.20. This means that it has been growing its distributions at 22% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that S.A. Fountaine Pajot has been growing its earnings per share at 25% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On S.A. Fountaine Pajot's Dividend

In summary, while it's always good to see the dividend being raised, we don't think S.A. Fountaine Pajot's payments are rock solid. While S.A. Fountaine Pajot is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for S.A. Fountaine Pajot you should be aware of, and 1 of them is potentially serious. If you are a dividend investor, you might also want to look at our curated 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.