Shareholders of Compagnie de Saint-Gobain (EPA:SGO) will receive a larger dividend than last year

The advice of Company of Saint-Gobain SA (EPA:SGO) announced that it would increase its dividend by 23% on June 8 to €1.63. This makes the dividend yield 3.0%, which is above the industry average.

See our latest analysis for Compagnie de Saint-Gobain

Compagnie de Saint-Gobain payment has strong earnings coverage

A big dividend yield for a few years doesn’t mean much if it can’t be sustained. However, prior to this announcement, Compagnie de Saint-Gobain’s dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is used to help it grow.

Looking ahead, earnings per share are expected to grow 15.6% over the next year. If the dividend continues to follow recent trends, we estimate the payout ratio to be 30%, which is within the range that allows us to be comfortable with the sustainability of the dividend.

ENXTPA: Historic SGO Dividend March 28, 2022

Dividend volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the past 10 years. The first annual payment in the past 10 years was €1.24 in 2012, and the last payment in the fiscal year was €1.33. Dividend payouts increased by less than 1% per year during this period. We are happy to see that the dividend has increased, but with a limited rate of growth and fluctuations in payouts, total shareholder return may be limited.

The dividend should increase

With a relatively unstable dividend, it is even more important to see if earnings per share increase. We are encouraged to see that Compagnie de Saint-Gobain has increased its earnings per share by 15% per year over the past five years. EPS growth bodes well for the dividend, as does the low payout ratio the company is currently reporting.

We really like the dividend from Compagnie de Saint-Gobain

In summary, it is always positive to see the dividend increase, and we are particularly satisfied with its overall sustainability. The company is easily earning enough to cover its dividend payments and it’s good to see that income translate into cash flow. All of these factors taken into account, we believe this has strong potential as a dividend-paying stock.

Market movements testify to the valuation of a consistent dividend policy over a more unpredictable one. However, there are other things for investors to consider when analyzing stock performance. For example, we identified 1 warning sign for Compagnie de Saint-Gobain which you should be aware of before investing. If you are a dividend investor, you can also consult our curated list of high yielding dividend stocks.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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