Sanofi (EPA:SAN) Is Paying Out A Larger Dividend Than Last Year

Sanofi's (EPA:SAN) dividend will be increasing from last year's payment of the same period to €3.92 on 14th of May. The payment will take the dividend yield to 3.8%, which is in line with the average for the industry.

Sanofi's Projected Earnings Seem Likely To Cover Future Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Sanofi's was paying out quite a large proportion of earnings and 82% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

Over the next year, EPS is forecast to expand by 95.3%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 46% which brings it into quite a comfortable range.

See our latest analysis for Sanofi

Sanofi Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was €2.80, compared to the most recent full-year payment of €3.92. This works out to be a compound annual growth rate (CAGR) of approximately 3.4% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Sanofi's Dividend Might Lack Growth

Investors could be attracted to the stock based on the quality of its payment history. Sanofi has impressed us by growing EPS at 14% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Sanofi's payments are rock solid. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 19 analysts we track are forecasting for Sanofi for free with public analyst estimates for the company. 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.