Capgemini's (EPA:CAP) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Capgemini SE (EPA:CAP) has announced that it will be paying its dividend of €3.40 on the 31st of May, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 1.5%, which is fairly typical for the industry.

See our latest analysis for Capgemini

Capgemini's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, Capgemini's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 32.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was €1.00, compared to the most recent full-year payment of €3.40. This implies that the company grew its distributions at a yearly rate of about 13% 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.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Capgemini has impressed us by growing EPS at 17% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Capgemini's prospects of growing its dividend payments in the future.

We Really Like Capgemini's 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Capgemini that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.