FinecoBank Banca Fineco's (BIT:FBK) Upcoming Dividend Will Be Larger Than Last Year's

FinecoBank Banca Fineco S.p.A. (BIT:FBK) has announced that it will be increasing its dividend from last year's comparable payment on the 24th of May to €0.49. Despite this raise, the dividend yield of 3.5% is only a modest boost to shareholder returns.

See our latest analysis for FinecoBank Banca Fineco

FinecoBank Banca Fineco's Earnings Will Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Having paid out dividends for 8 years, FinecoBank Banca Fineco has a good history of paying out a part of its earnings to shareholders. Based on FinecoBank Banca Fineco's last earnings report, the payout ratio is at a decent 70%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next 3 years are set to see EPS grow by 52.0%. Analysts estimate the future payout ratio will be 70% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

FinecoBank Banca Fineco's Dividend Has Lacked Consistency

FinecoBank Banca Fineco has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2015, the dividend has gone from €0.20 total annually to €0.49. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that FinecoBank Banca Fineco has been growing its earnings per share at 15% a year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like FinecoBank Banca Fineco's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, FinecoBank Banca Fineco has 2 warning signs (and 1 which is significant) 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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