Publicis Groupe (EPA:PUB) Will Pay A Larger Dividend Than Last Year At €2.90

Publicis Groupe S.A. (EPA:PUB) has announced that it will be increasing its dividend from last year's comparable payment on the 5th of July to €2.90. Based on this payment, the dividend yield for the company will be 4.1%, which is fairly typical for the industry.

Check out our latest analysis for Publicis Groupe

Publicis Groupe's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, Publicis Groupe's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 23.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 49%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of €0.70 in 2013 to the most recent total annual payment of €2.90. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Publicis Groupe Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Publicis Groupe has been growing its earnings per share at 5.2% a year over the past five years. Publicis Groupe definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

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. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Publicis Groupe that investors should know about before committing capital to this stock. Is Publicis Groupe not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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