Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, Compagnie de Saint-Gobain SA (EPA:SGO) has paid a dividend to shareholders. It currently yields 3.9%. Let’s dig deeper into whether Compagnie de Saint-Gobain should have a place in your portfolio.
5 checks you should use to assess a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it paying an annual yield above 75% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share amount increased over the past?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
Does Compagnie de Saint-Gobain pass our checks?
Compagnie de Saint-Gobain has a trailing twelve-month payout ratio of 35%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect SGO’s payout to increase to 40% of its earnings, which leads to a dividend yield of around 4.4%. However, EPS is forecasted to fall to €3.31 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Not only have dividend payouts from Compagnie de Saint-Gobain fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Compared to its peers, Compagnie de Saint-Gobain produces a yield of 3.9%, which is high for Building stocks but still below the market’s top dividend payers.
Taking all the above into account, Compagnie de Saint-Gobain is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three essential aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for SGO’s future growth? Take a look at our free research report of analyst consensus for SGO’s outlook.
- Valuation: What is SGO worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether SGO is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.