Bollore SE (EPA:BOL) will pay a dividend of €0.02 on September 1. The dividend yield is 1.2% based on this payout, which is a bit low compared to other companies in the industry.

Check out our latest analysis for Bolloré

Bolloré earnings easily cover distributions

It would be nice if the yield was higher, but we should also check whether higher levels of dividend payments would be sustainable. Although Bolloré is not profitable, it distributes less than 75% of its free cash flow, which means there is plenty left to reinvest in the business. In general, cash flow is more important than more traditional measures of earnings, so we feel quite comfortable with the dividend at this level.

According to analysts, EPS should be several times higher next year. If the dividend continues to follow recent trends, we estimate the payout ratio to be 0.1%, so there is not too much pressure on the dividend.

Bolloré has a strong balance sheet

The company has a steady history of paying dividends with very little fluctuation. The dividend went from an annual total of €0.033 in 2012 to the last total annual payment of €0.06. This equates to a compound annual growth rate (CAGR) of approximately 6.2% per year during this period. Dividend growth has been quite reliable, so we believe this can provide investors with some good additional income in their portfolio.

The dividend has limited growth potential

Investors in the company will be happy to have received dividend income for a while. Unfortunately, things are not as good as they seem. Earnings per share have fallen 101% over the past five years. A sharp drop in earnings per share is not terrible from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall enough. It’s not all bad news though, as earnings are expected to rise over the next 12 months – we’d just be a bit cautious until this becomes a long-term trend.

In summary

Overall, we don’t think this company is generating a great dividend, even though the dividend hasn’t been cut this year. The company generates a lot of cash, but we still think the dividend is a bit high for comfort. We would probably look elsewhere for an income investment.

It is important to note that companies with a consistent dividend policy will generate greater investor confidence than those with an erratic policy. Meanwhile, despite the importance of dividend payments, these are not the only factors our readers should be aware of when evaluating a company. See if management has its own wealth at stake, by checking insider stakes in Bolloré shares. Looking for more high yield dividend ideas? Try our collection of strong dividend payers.

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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.