L'Air Liquide (EPA:AI) Is Paying Out A Larger Dividend Than Last Year

L'Air Liquide S.A.'s (EPA:AI) dividend will be increasing from last year's payment of the same period to €2.95 on 17th of May. This takes the annual payment to 1.9% of the current stock price, which is about average for the industry.

See our latest analysis for L'Air Liquide

L'Air Liquide's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, L'Air Liquide was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 46.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 40% by next year, which is in a pretty sustainable range.

L'Air Liquide Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of €1.55 in 2013 to the most recent total annual payment of €2.95. This implies that the company grew its distributions at a yearly rate of about 6.6% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

L'Air Liquide May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, L'Air Liquide has only grown its earnings per share at 4.0% per annum over the past five years. Growth of 4.0% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

We Really Like L'Air Liquide's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for L'Air Liquide that investors should take into consideration. Is L'Air Liquide not quite the opportunity you were looking for? Why not check out our selection of top 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.