L'Oréal's (EPA:OR) Upcoming Dividend Will Be Larger Than Last Year's

L'Oréal S.A. (EPA:OR) will increase its dividend from last year's comparable payment on the 30th of April to €6.60. This takes the annual payment to 1.5% of the current stock price, which is about average for the industry.

See our latest analysis for L'Oréal

L'Oréal's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, L'Oréal was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 28.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 48%, which is in the range that makes us comfortable with the sustainability of the dividend.

L'Oréal Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was €2.50 in 2014, and the most recent fiscal year payment was €6.60. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. L'Oréal has impressed us by growing EPS at 11% 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.

L'Oréal Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that L'Oréal is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 22 L'Oréal analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is L'Oréal not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.