Banco BPM (BIT:BAMI) Is Paying Out A Larger Dividend Than Last Year

Banco BPM S.p.A. (BIT:BAMI) has announced that it will be increasing its dividend from last year's comparable payment on the 26th of April to €0.23. This takes the annual payment to 6.3% of the current stock price, which is about average for the industry.

Check out our latest analysis for Banco BPM

Banco BPM's Payment Expected To Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Banco BPM is just starting to establish itself as being able to pay dividends to shareholders, given its short 2-year history of distributing earnings. Diving into the company's earnings report, the payout ratio is set at 50%, which is a decent ratio of dividend payout to earnings, and may sustain future dividends if the company stays at its current trend.

Looking forward, EPS is forecast to rise by 56.4% over the next 3 years. The future payout ratio could be 53% over that time period, according to analyst estimates, which is a good look for the future 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 dividend has gone from an annual total of €0.06 in 2021 to the most recent total annual payment of €0.23. This implies that the company grew its distributions at a yearly rate of about 96% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Banco BPM's EPS has declined at around 18% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Our Thoughts On Banco BPM's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Banco BPM's payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Banco BPM has been making. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Banco BPM 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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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.