Sopra Steria Group's (EPA:SOP) Upcoming Dividend Will Be Larger Than Last Year's

The board of Sopra Steria Group SA (EPA:SOP) has announced that it will be paying its dividend of €4.30 on the 31st of May, an increased payment from last year's comparable dividend. This makes the dividend yield 2.3%, which is above the industry average.

View our latest analysis for Sopra Steria Group

Sopra Steria Group's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Sopra Steria Group'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 54.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 24%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was €1.90 in 2013, and the most recent fiscal year payment was €4.30. This means that it has been growing its distributions at 8.5% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Sopra Steria Group Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Sopra Steria Group has grown earnings per share at 7.6% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Sopra Steria Group's prospects of growing its dividend payments in the future.

Our Thoughts On Sopra Steria Group's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Sopra Steria Group that investors should know about before committing capital to this stock. 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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