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There is a lot to be liked about TOTAL S.A. (EPA:FP) as an income stock. It has paid dividends over the past 10 years. The company currently pays out a dividend yield of 5.2% to shareholders, making it a relatively attractive dividend stock. Does TOTAL tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for TOTAL
How I analyze a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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Is it the top 25% annual dividend yield payer?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has dividend per share risen in the past couple of years?
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Is is able to pay the current rate of dividends from its earnings?
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Will it have the ability to keep paying its dividends going forward?
How well does TOTAL fit our criteria?
The current trailing twelve-month payout ratio for the stock is 69%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 54% which, assuming the share price stays the same, leads to a dividend yield of around 5.5%. However, EPS should increase to $5.43, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
Relative to peers, TOTAL has a yield of 5.2%, which is high for Oil and Gas stocks.
Next Steps:
Taking into account the dividend metrics, TOTAL ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three important factors you should further research:
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Future Outlook: What are well-informed industry analysts predicting for FP’s future growth? Take a look at our free research report of analyst consensus for FP’s outlook.
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Valuation: What is FP 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 FP is currently mispriced by the market.
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Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. On rare occasion, data errors may occur. Thank you for reading.