Christian Dior (EPA:CDI) Has Announced That It Will Be Increasing Its Dividend To €3.00

Christian Dior SE (EPA:CDI) has announced that it will be increasing its dividend on the 2nd of December to €3.00. Based on the announced payment, the dividend yield for the company will be 1.0%, which is fairly typical for the industry.

See our latest analysis for Christian Dior

Christian Dior's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, Christian Dior's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 19.8% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

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 2011, the dividend has gone from €2.10 to €7.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Christian Dior has grown earnings per share at 20% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Christian Dior Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Christian Dior 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 of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Christian Dior that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.

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