L'Air Liquide (EPA:AI) Will Pay A Larger Dividend Than Last Year At €2.90

The board of L'Air Liquide S.A. (EPA:AI) has announced that it will be increasing its dividend on the 18th of May to €2.90. The announced payment will take the dividend yield to 1.9%, which is in line with the average for the industry.

View our latest analysis for L'Air Liquide

L'Air Liquide's Earnings Easily Cover the Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, L'Air Liquide's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 16.9%. If the dividend continues on this path, the payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was €1.71 in 2012, and the most recent fiscal year payment was €2.90. This implies that the company grew its distributions at a yearly rate of about 5.4% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

L'Air Liquide Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that L'Air Liquide has grown earnings per share at 5.3% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. For example, we've picked out 2 warning signs for L'Air Liquide that investors should know about before committing capital to this stock. Is L'Air Liquide not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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