Banca Popolare di Sondrio (BIT:BPSO) Has Announced That It Will Be Increasing Its Dividend To €0.56

Banca Popolare di Sondrio S.p.A (BIT:BPSO) has announced that it will be increasing its dividend from last year's comparable payment on the 22nd of May to €0.56. This will take the annual payment to 7.5% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Banca Popolare di Sondrio

Banca Popolare di Sondrio's Payment Expected To Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Banca Popolare di Sondrio has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 55%, which means that Banca Popolare di Sondrio would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, earnings per share is forecast to fall by 16.2% over the next 3 years. Despite that, analysts estimate the future payout ratio could be 59% over the same time period, which is in a pretty comfortable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was €0.0455, compared to the most recent full-year payment of €0.56. This implies that the company grew its distributions at a yearly rate of about 29% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Banca Popolare di Sondrio has been growing its earnings per share at 33% a year over the past five years. Banca Popolare di Sondrio is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Banca Popolare di Sondrio (of which 1 is potentially serious!) you should know about. Is Banca Popolare di Sondrio 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.