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Capgemini SE The dividend (EPA: CAP) will increase to € 1.95 on June 4. This makes the dividend yield roughly the same as the industry average at 1.3%.
Discover our latest analyzes for Capgemini
Capgemini’s dividend is well covered by earnings
We’re not overly impressed with dividend yields unless they can be sustained over time. However, prior to this announcement, Capgemini’s dividend was comfortably hedged by both cash flow and earnings. This means that most of what the business earns is used to help it grow.
Going forward, earnings per share are expected to increase 10.6% over the next year. If the dividend continues on this path, the payout ratio could be 32% by next year, which we believe can be quite sustainable going forward.
Dividend volatility
Although the company has a long history of dividends, it has been cut at least once in the past 10 years. The dividend went from € 1.00 in 2011 to the last annual payment of € 1.95. This means that he increased his distributions by 6.9% per year during this period. A reasonable rate of dividend growth is good to see, but we are concerned that the dividend history is not as strong as we would like, having been cut at least once.
Dividend growth can be hard to achieve
Since the dividend has been reduced in the past, we need to check if profits are increasing and if this could lead to higher dividends in the future. Over the past five years, Capgemini’s earnings per share have declined by around 3.1% per year. A slight drop in profits is not terrible, and the dividend is unlikely to increase in the future unless this trend can be reversed. This isn’t all bad news though, as earnings are expected to rise over the next 12 months – we’d just be a little cautious until that can turn into a longer-term trend.
Our thoughts on the Capgemini dividend
Overall, we still like to see the dividend go up, but we don’t think Capgemini will make a good income. In the past, payments have been volatile, but in the short term the dividend could be reliable as the business generates enough cash. This company is not part of the first income level providing shares.
It is important to note that companies with a consistent dividend policy will generate greater investor confidence than those with an irregular policy. Still, there are a host of other factors that investors need to consider, aside from dividend payments, when analyzing a business. For example, we have chosen 1 warning sign for Capgemini that investors should be aware of before committing any capital to this stock. We have also set up a list of global stocks with a solid dividend.
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