Pirelli & C's (BIT:PIRC) Dividend Will Be Increased To €0.25

The board of Pirelli & C. S.p.A. (BIT:PIRC) has announced that the dividend on 25th of June will be increased to €0.25, which will be 26% higher than last year's payment of €0.198 which covered the same period. This will take the annual payment to 3.6% of the stock price, which is above what most companies in the industry pay.

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Pirelli & C's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Pirelli & C's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 41.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 40% by next year, which is in a pretty sustainable range.

See our latest analysis for Pirelli & C

Pirelli & C's Dividend Has Lacked Consistency

Looking back, Pirelli & C's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2019, the annual payment back then was €0.177, compared to the most recent full-year payment of €0.198. This means that it has been growing its distributions at 1.9% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Unfortunately, Pirelli & C's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 1.3% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

Our Thoughts On Pirelli & C's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. As an example, we've identified 1 warning sign for Pirelli & C that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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