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

Intesa Sanpaolo S.p.A. (BIT:ISP) has announced that it will pay a dividend of €0.0868 per share on the 24th of May. This payment means that the dividend yield will be 6.6%, which is around the industry average.

View our latest analysis for Intesa Sanpaolo

Intesa Sanpaolo's Payment Expected To Have Solid Earnings Coverage

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

Intesa Sanpaolo has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 71%, which means that Intesa Sanpaolo would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 39.9% over the next 3 years. Analysts forecast the future payout ratio could be 72% over the same time horizon, which is a number we think the company can maintain.

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 2013, the dividend has gone from €0.05 total annually to €0.161. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, Intesa Sanpaolo's earnings per share has shrunk at approximately 8.8% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

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 low payout ratio is a redeeming feature, but generally we are not too happy with the payments Intesa Sanpaolo has been making. We don't think Intesa Sanpaolo is a great stock to add to your portfolio if income is your focus.

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. Taking the debate a bit further, we've identified 1 warning sign for Intesa Sanpaolo that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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