Amundi (EPA:AMUN) Will Pay A Larger Dividend Than Last Year At €4.10

Amundi's (EPA:AMUN) dividend will be increasing to €4.10 on 25th of May. This takes the dividend yield from 7.2% to 7.2%, which shareholders will be pleased with.

View our latest analysis for Amundi

Amundi's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Amundi's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 15.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could reach 79%, which is definitely on the higher side.

Amundi's Dividend Has Lacked Consistency

Looking back, Amundi's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from €2.05 in 2016 to the most recent annual payment of €4.10. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Amundi has grown earnings per share at 15% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Amundi Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Amundi is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

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. For example, we've picked out 2 warning signs for Amundi that investors should know about before committing capital to this stock. Is Amundi not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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