Safran's (EPA:SAF) Shareholders Will Receive A Bigger Dividend Than Last Year

Safran SA's (EPA:SAF) dividend will be increasing from last year's payment of the same period to €2.90 on 2nd of June. The payment will take the dividend yield to 1.4%, which is in line with the average for the industry.

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Safran's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Safran's Could Struggle to Maintain Dividend Payments In The Future

Safran's Future Dividends May Potentially Be At Risk

Unless the payments are sustainable, the dividend yield doesn't mean too much. Even though Safran isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

EPS is forecast to rise very quickly over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach 179%, which is unsustainable.

View our latest analysis for Safran

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was €1.12, compared to the most recent full-year payment of €2.90. This works out to be a compound annual growth rate (CAGR) of approximately 10.0% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings has been rising at 3.9% per annum over the last five years, which admittedly is a bit slow. Safran isn't actually turning a profit, which makes it much harder for us to see how they can grow dividends.

Our Thoughts On Safran's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Safran's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Safran is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 14 analysts we track are forecasting for Safran for free with public analyst estimates for the company. Is Safran not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.