L'Air Liquide's (EPA:AI) Upcoming Dividend Will Be Larger Than Last Year's

L'Air Liquide S.A. (EPA:AI) will increase its dividend on the 18th of May to €2.90. This takes the annual payment to 1.8% of the current stock price, which is about average for the industry.

Check out our latest analysis for L'Air Liquide

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

Solid dividend yields are great, but they only really help us if the payment is sustainable. 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.

The next year is set to see EPS grow by 16.9%. 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.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the first annual payment was €1.71, compared to the most recent full-year payment of €2.90. This works out to be a compound annual growth rate (CAGR) of approximately 5.4% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. L'Air Liquide might have put its house in order since then, but we remain cautious.

The Dividend Has Growth Potential

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 5.4% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. Taking the debate a bit further, we've identified 2 warning signs for L'Air Liquide that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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