Piaggio & C (BIT:PIA) Has Announced That It Will Be Increasing Its Dividend To €0.10

Piaggio & C. SpA (BIT:PIA) will increase its dividend from last year's comparable payment on the 26th of April to €0.10. The payment will take the dividend yield to 4.5%, which is in line with the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Piaggio & C's stock price has increased by 43% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Piaggio & C

Piaggio & C's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Piaggio & C's was paying out quite a large proportion of earnings and 77% 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.

Over the next year, EPS is forecast to expand by 70.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 54%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was €0.082, compared to the most recent full-year payment of €0.185. This means that it has been growing its distributions at 8.5% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Piaggio & C's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Piaggio & C has grown earnings per share at 34% per 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. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Piaggio & C that investors should take into consideration. Is Piaggio & C not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.