Ipsen's (EPA:IPN) Dividend Will Be Increased To €1.40

Ipsen S.A. (EPA:IPN) has announced that it will be increasing its dividend from last year's comparable payment on the 6th of June to €1.40. Although the dividend is now higher, the yield is only 1.5%, which is below the industry average.

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Ipsen's Projected Earnings Seem Likely To Cover Future Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Ipsen was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Looking forward, earnings per share is forecast to rise by 122.7% over the next year. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Ipsen

Ipsen 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. Since 2015, the annual payment back then was €0.85, compared to the most recent full-year payment of €1.40. This means that it has been growing its distributions at 5.1% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Ipsen has impressed us by growing EPS at 20% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Ipsen's prospects of growing its dividend payments in the future.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. On the plus side, the dividend looks sustainable by most measures but it is let down by the lack of cash flows. 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Ipsen that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.