Sopra Steria Group (EPA:SOP) Is Paying Out A Larger Dividend Than Last Year

Sopra Steria Group SA's (EPA:SOP) dividend will be increasing from last year's payment of the same period to €4.30 on 31st of May. This will take the annual payment to 2.4% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Sopra Steria Group

Sopra Steria Group's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Sopra Steria Group'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.

Over the next year, EPS is forecast to expand by 27.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of €1.90 in 2013 to the most recent total annual payment of €4.30. This means that it has been growing its distributions at 8.5% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

We Could See Sopra Steria Group's Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Sopra Steria Group has been growing its earnings per share at 7.5% a year over the past five years. Sopra Steria Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Sopra Steria Group's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Sopra Steria Group that investors should take into consideration. 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.