Piaggio & C (BIT:PIA) Has Announced That It Will Be Increasing Its Dividend To €0.065

Piaggio & C. SpA (BIT:PIA) will increase its dividend on the 21st of April to €0.065. This will take the annual payment from 6.1% to 6.1% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Piaggio & C

Piaggio & C's Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Piaggio & C's dividend made up quite a large proportion of earnings but only 74% of free cash flows. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 33.6%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 75% which would be quite comfortable going to take the dividend forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was €0.07 in 2012, and the most recent fiscal year payment was €0.15. This means that it has been growing its distributions at 7.9% per annum 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 Could Be Constrained

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see Piaggio & C has been growing its earnings per share at 34% a year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Piaggio & C hasn't been doing.

Our Thoughts On Piaggio & C's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Piaggio & C is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Piaggio & C that investors should take into consideration. 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.