Ipsos (EPA:IPS) Will Pay A Larger Dividend Than Last Year At €1.15

Ipsos SA's (EPA:IPS) dividend will be increasing to €1.15 on 5th of July. Although the dividend is now higher, the yield is only 2.5%, which is below the industry average.

View our latest analysis for Ipsos

Ipsos' Earnings Easily Cover the Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Ipsos' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 11.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, 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 €0.63, compared to the most recent full-year payment of €1.15. This implies that the company grew its distributions at a yearly rate of about 6.2% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Ipsos might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Ipsos has seen EPS rising for the last five years, at 12% per annum. Ipsos definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Ipsos' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Ipsos that investors should take into consideration. Is Ipsos 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.