Piaggio & C's (BIT:PIA) Shareholders Will Receive A Bigger Dividend Than Last Year

Piaggio & C. SpA's (BIT:PIA) dividend will be increasing from last year's payment of the same period to €0.125 on 20th of September. This will take the dividend yield to an attractive 7.2%, providing a nice boost to shareholder returns.

Check out our latest analysis for Piaggio & C

Piaggio & C's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. At the time of the last dividend payment, Piaggio & C was paying out a very large proportion of what it was earning and 96% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

The next year is set to see EPS grow by 48.4%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 56% which brings it into quite a comfortable range.

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 €0.092, compared to the most recent full-year payment of €0.25. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Piaggio & C Might Find It Hard To Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Piaggio & C has impressed us by growing EPS at 33% per year over the past five years. However, Piaggio & C isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Piaggio & C will make a great income stock. Strong earnings growth means Piaggio & C has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Piaggio & C that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.