Banca Popolare di Sondrio (BIT:BPSO) Will Pay A Larger Dividend Than Last Year At €0.56

The board of Banca Popolare di Sondrio S.p.A (BIT:BPSO) has announced that it will be paying its dividend of €0.56 on the 22nd of May, an increased payment from last year's comparable dividend. This makes the dividend yield 8.2%, which is above the industry average.

Check out our latest analysis for Banca Popolare di Sondrio

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

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Banca Popolare di Sondrio has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Banca Popolare di Sondrio's payout ratio of 55% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to fall by 18.6%. Fortunately, analysts forecast the future payout ratio to be 59% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of €0.03 in 2014 to the most recent total annual payment of €0.56. This works out to be a compound annual growth rate (CAGR) of approximately 34% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Banca Popolare di Sondrio has impressed us by growing EPS at 33% per 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

In summary, while it's always good to see the dividend being raised, we don't think Banca Popolare di Sondrio's payments are rock solid. While Banca Popolare di Sondrio is earning enough to cover the dividend, we are generally unimpressed with its future prospects. This company is not in the top tier of income providing stocks.

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, Banca Popolare di Sondrio has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. 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.