Credito Emiliano's (BIT:CE) Upcoming Dividend Will Be Larger Than Last Year's

The board of Credito Emiliano S.p.A. (BIT:CE) has announced that it will be paying its dividend of €0.75 on the 21st of May, an increased payment from last year's comparable dividend. This takes the annual payment to 5.8% of the current stock price, which is about average for the industry.

View our latest analysis for Credito Emiliano

Credito Emiliano's Earnings Will Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Having distributed dividends for at least 10 years, Credito Emiliano has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 41%, which means that Credito Emiliano would be able to pay its last dividend without pressure on the balance sheet.

EPS is set to fall by 14.0% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 51% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from €0.12 total annually to €0.75. This means that it has been growing its distributions at 20% per annum over that time. Credito Emiliano has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Credito Emiliano has been growing its earnings per share at 25% a year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Credito Emiliano could prove to be a strong dividend payer.

We Really Like Credito Emiliano's Dividend

Overall, a dividend increase is always good, and we think that Credito Emiliano is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Credito Emiliano has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.