Should You Buy Banca Popolare di Sondrio S.p.A (BIT:BPSO) For Its Upcoming Dividend?

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Banca Popolare di Sondrio S.p.A (BIT:BPSO) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Banca Popolare di Sondrio's shares before the 22nd of May to receive the dividend, which will be paid on the 24th of May.

The company's next dividend payment will be €0.28 per share, and in the last 12 months, the company paid a total of €0.28 per share. Based on the last year's worth of payments, Banca Popolare di Sondrio stock has a trailing yield of around 6.8% on the current share price of €4.124. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Banca Popolare di Sondrio

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Banca Popolare di Sondrio paid out more than half (51%) of its earnings last year, which is a regular payout ratio for most companies.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Banca Popolare di Sondrio's earnings per share have risen 14% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Banca Popolare di Sondrio has delivered an average of 13% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Should investors buy Banca Popolare di Sondrio for the upcoming dividend? Earnings per share are growing nicely, and Banca Popolare di Sondrio is paying out a percentage of its earnings that is around the average for dividend-paying stocks. We think this is a pretty attractive combination, and would be interested in investigating Banca Popolare di Sondrio more closely.

While it's tempting to invest in Banca Popolare di Sondrio for the dividends alone, you should always be mindful of the risks involved. Be aware that Banca Popolare di Sondrio is showing 3 warning signs in our investment analysis, and 1 of those can't be ignored...

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.