Sanofi's (EPA:SAN) Upcoming Dividend Will Be Larger Than Last Year's

Sanofi (EPA:SAN) will increase its dividend from last year's comparable payment on the 14th of May to €3.92. This takes the annual payment to 4.3% of the current stock price, which is about average for the industry.

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Sanofi's Future Dividend Projections Appear Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last dividend made up a very large portion of earnings and also represented 82% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.

Looking forward, earnings per share is forecast to rise by 92.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 47%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

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Sanofi Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of €2.80 in 2015 to the most recent total annual payment of €3.92. This works out to be a compound annual growth rate (CAGR) of approximately 3.4% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Sanofi Might Find It Hard To Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Sanofi has been growing its earnings per share at 14% a year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Sanofi will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think Sanofi is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 19 Sanofi analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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.