Banco BPM (BIT:BAMI) Is Increasing Its Dividend To €0.56

The board of Banco BPM S.p.A. (BIT:BAMI) has announced that it will be paying its dividend of €0.56 on the 24th of April, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 10.0%, providing a nice boost to shareholder returns.

Check out our latest analysis for Banco BPM

Banco BPM's Dividend Forecasted To Be Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Having paid out dividends for only 3 years, Banco BPM does not have much of a history being a dividend paying company. Taking data from Banco BPM's last earnings report, the payout ratio is at a decent 36%, meaning that the company is able to pay out its dividend with some room to spare.

The next 3 years are set to see EPS grow by 5.4%. Analysts estimate the future payout ratio will be 67% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Banco BPM Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The annual payment during the last 3 years was €0.06 in 2021, and the most recent fiscal year payment was €0.56. This works out to be a compound annual growth rate (CAGR) of approximately 111% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Banco BPM has impressed us by growing EPS at 35% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Banco BPM Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Banco BPM is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Banco BPM has 2 warning signs (and 1 which is significant) we think you should know about. Is Banco BPM 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.