La Française des Jeux Société anonyme (EPA:FDJ) Is Paying Out A Larger Dividend Than Last Year

The board of La Française des Jeux Société anonyme (EPA:FDJ) has announced that it will be paying its dividend of €1.78 on the 7th of May, an increased payment from last year's comparable dividend. This will take the annual payment to 5.2% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for La Française des Jeux Société anonyme

La Française des Jeux Société anonyme's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, La Française des Jeux Société anonyme's dividend made up quite a large proportion of earnings but only 67% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Earnings per share is forecast to rise by 15.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 78%, which is on the higher side, but certainly still feasible.

La Française des Jeux Société anonyme Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The annual payment during the last 4 years was €0.45 in 2020, and the most recent fiscal year payment was €1.78. This means that it has been growing its distributions at 41% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

La Française des Jeux Société anonyme Might Find It Hard To Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that La Française des Jeux Société anonyme has grown earnings per share at 20% per year over the past five years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why La Française des Jeux Société anonyme is not retaining those earnings to reinvest in growth.

Our Thoughts On La Française des Jeux Société anonyme's Dividend

Overall, we always like to see the dividend being raised, but we don't think La Française des Jeux Société anonyme will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good 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 example, we've picked out 1 warning sign for La Française des Jeux Société anonyme that investors should know about before committing capital to this stock. Is La Française des Jeux Société anonyme 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.