La Française des Jeux Société anonyme's (EPA:FDJ) Upcoming Dividend Will Be Larger Than Last Year's

La Française des Jeux Société anonyme's (EPA:FDJ) dividend will be increasing from last year's payment of the same period to €1.37 on 9th of May. This makes the dividend yield 3.6%, which is above the industry average.

Check out our latest analysis for La Française des Jeux Société anonyme

La Française des Jeux Société anonyme's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, La Française des Jeux Société anonyme's was paying out quite a large proportion of earnings and 87% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

Over the next year, EPS is forecast to expand by 31.2%. If the dividend continues along recent trends, we estimate the payout ratio could reach 76%, which is on the higher side, but certainly still feasible.

La Française des Jeux Société anonyme Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2020, the annual payment back then was €0.45, compared to the most recent full-year payment of €1.37. This means that it has been growing its distributions at 45% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

La Française des Jeux Société anonyme's Dividend Might Lack Growth

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. La Française des Jeux Société anonyme has impressed us by growing EPS at 11% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

In Summary

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. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We don't think La Française des Jeux Société anonyme is a great stock to add to your portfolio if income is your focus.

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. Taking the debate a bit further, we've identified 1 warning sign for La Française des Jeux Société anonyme that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.