Here's What We Like About EssilorLuxottica Société anonyme's (EPA:EL) Upcoming Dividend

EssilorLuxottica Société anonyme (EPA:EL) is about to trade ex-dividend in the next four days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase EssilorLuxottica Société anonyme's shares on or after the 7th of May will not receive the dividend, which will be paid on the 5th of June.

The company's upcoming dividend is €3.95 a share, following on from the last 12 months, when the company distributed a total of €3.95 per share to shareholders. Looking at the last 12 months of distributions, EssilorLuxottica Société anonyme has a trailing yield of approximately 1.6% on its current stock price of €252.70. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. It paid out 76% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 35% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that EssilorLuxottica Société anonyme's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

See our latest analysis for EssilorLuxottica Société anonyme

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see EssilorLuxottica Société anonyme's earnings per share have risen 16% per annum over the last five years. It paid out more than three-quarters of its earnings in the last year, even though earnings per share are growing rapidly. Higher earnings generally bode well for growing dividends, although with seemingly strong growth prospects we'd wonder why management are not reinvesting more in the business.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. EssilorLuxottica Société anonyme has delivered an average of 14% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Has EssilorLuxottica Société anonyme got what it takes to maintain its dividend payments? EssilorLuxottica Société anonyme's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.

Ever wonder what the future holds for EssilorLuxottica Société anonyme? See what the 16 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.