Banco BPM's (BIT:BAMI) Shareholders Will Receive A Bigger Dividend Than Last Year

Banco BPM S.p.A.'s (BIT:BAMI) dividend will be increasing from last year's payment of the same period to €0.23 on 26th of April. This makes the dividend yield about the same as the industry average at 5.7%.

View our latest analysis for Banco BPM

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

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Banco BPM has a short history of paying out dividends, with its current track record at only 2 years. Taking data from Banco BPM's last earnings report, the payout ratio is at a decent 49%, 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 54.5%. 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 Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The annual payment during the last 2 years was €0.06 in 2021, and the most recent fiscal year payment was €0.23. This works out to be a compound annual growth rate (CAGR) of approximately 96% a year over that time. 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Banco BPM's earnings per share has shrunk at 18% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

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. While Banco BPM is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Banco BPM has 2 warning signs (and 1 which is potentially serious) 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.