EssilorLuxottica Société anonyme (EPA:EL) Has Affirmed Its Dividend Of €3.95

The board of EssilorLuxottica Société anonyme (EPA:EL) has announced that it will pay a dividend on the 5th of June, with investors receiving €3.95 per share. Based on this payment, the dividend yield will be 1.5%, which is fairly typical for the industry.

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EssilorLuxottica Société anonyme's Projected Earnings Seem Likely To Cover Future Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before this announcement, EssilorLuxottica Société anonyme was paying out 76% of earnings, but a comparatively small 54% of free cash flows. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 64.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 53%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

View our latest analysis for EssilorLuxottica Société anonyme

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was €1.02, compared to the most recent full-year payment of €3.95. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. EssilorLuxottica Société anonyme has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

EssilorLuxottica Société anonyme's Dividend Might Lack Growth

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. EssilorLuxottica Société anonyme has impressed us by growing EPS at 16% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think EssilorLuxottica Société anonyme is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 17 EssilorLuxottica Société anonyme analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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.