Banco di Desio e della Brianza (BIT:BDB) Has Announced That It Will Be Increasing Its Dividend To €0.14

Banco di Desio e della Brianza S.p.A. (BIT:BDB) will increase its dividend on the 27th of April to €0.14. This will take the annual payment from 4.1% to 7.0% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Banco di Desio e della Brianza

Banco di Desio e della Brianza's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Banco di Desio e della Brianza was paying only paying out a fraction of earnings, but the payment was a massive 436% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS could expand by 15.8% if recent trends continue. If the dividend continues on this path, the payout ratio could be 51% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from €0.10 in 2012 to the most recent annual payment of €0.14. This implies that the company grew its distributions at a yearly rate of about 2.7% over that duration. 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.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Banco di Desio e della Brianza has seen EPS rising for the last five years, at 16% per annum. Banco di Desio e della Brianza definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Banco di Desio e della Brianza's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Banco di Desio e della Brianza's payments are rock solid. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Banco di Desio e della Brianza that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.