Pernod Ricard SA's (EPA:RI) dividend will be increasing from last year's payment of the same period to €2.06 on 7th of July. Based on this payment, the dividend yield for the company will be 2.3%, which is fairly typical for the industry.
See our latest analysis for Pernod Ricard
Pernod Ricard's Dividend Is Well Covered By Earnings
We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend was quite comfortably covered by Pernod Ricard's earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.
Over the next year, EPS is forecast to expand by 21.5%. If the dividend continues on this path, the payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.
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. The dividend has gone from an annual total of €1.58 in 2013 to the most recent total annual payment of €4.62. This implies that the company grew its distributions at a yearly rate of about 11% 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.
We Could See Pernod Ricard's Dividend Growing
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Pernod Ricard has impressed us by growing EPS at 8.7% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
Our Thoughts On Pernod Ricard's Dividend
Overall, we always like to see the dividend being raised, but we don't think Pernod Ricard will make a great income stock. While Pernod Ricard is earning enough to cover the dividend, we are generally unimpressed with its future prospects. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Pernod Ricard (1 shouldn't be ignored!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
About ENXTPA:RI
Undervalued second-rate dividend payer.
