Intesa Sanpaolo's (BIT:ISP) Dividend Will Be €0.0868

The board of Intesa Sanpaolo S.p.A. (BIT:ISP) has announced that it will pay a dividend on the 24th of May, with investors receiving €0.0868 per share. This means the annual payment is 6.2% of the current stock price, which is above the average for the industry.

See our latest analysis for Intesa Sanpaolo

Intesa Sanpaolo's Dividend Forecasted To Be Well Covered By Earnings

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

Intesa Sanpaolo has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Intesa Sanpaolo's last earnings report, the payout ratio is at a decent 86%, 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 5.5%. Despite the current payout ratio being slightly elevated, analysts estimate the future payout ratio will be 72% over the same time period, which would make us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was €0.05 in 2013, and the most recent fiscal year payment was €0.161. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Intesa Sanpaolo 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.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Intesa Sanpaolo's earnings per share has shrunk at 11% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Intesa Sanpaolo's payments, as there could be some issues with sustaining them into the future. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Intesa Sanpaolo that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of 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.