EssilorLuxottica Société anonyme's (EPA:EL) Dividend Will Be €3.95

EssilorLuxottica Société anonyme (EPA:EL) has announced that it will pay a dividend of €3.95 per share on the 5th of June. This means the dividend yield will be fairly typical at 1.6%.

We check all companies for important risks. See what we found for EssilorLuxottica Société anonyme in our free report.

EssilorLuxottica Société anonyme's Future Dividend Projections Appear Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, EssilorLuxottica Société anonyme's dividend made up quite a large proportion of earnings but only 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 58.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 55%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

See our latest analysis for EssilorLuxottica Société anonyme

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 €1.02 in 2015 to the most recent total annual payment of €3.95. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. 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 Might Find It Hard To Grow Its Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. EssilorLuxottica Société anonyme has seen EPS rising for the last five years, at 16% per annum. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 17 analysts we track are forecasting for EssilorLuxottica Société anonyme for free with public analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend 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.