Mediobanca Banca di Credito Finanziario (BIT:MB) Is Increasing Its Dividend To €0.75

The board of Mediobanca Banca di Credito Finanziario S.p.A. (BIT:MB) has announced that it will be paying its dividend of €0.75 on the 23rd of November, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 7.5%.

Check out our latest analysis for Mediobanca Banca di Credito Finanziario

Mediobanca Banca di Credito Finanziario's Dividend Forecasted To Be Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Having distributed dividends for at least 10 years, Mediobanca Banca di Credito Finanziario 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 69%, which means that Mediobanca Banca di Credito Finanziario would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 0.9%. 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.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the annual payment back then was €0.05, compared to the most recent full-year payment of €0.75. This works out to be a compound annual growth rate (CAGR) of approximately 31% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend's Growth Prospects Are Limited

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. Earnings has been rising at 3.3% per annum over the last five years, which admittedly is a bit slow. Growth of 3.3% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Mediobanca Banca di Credito Finanziario's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Mediobanca Banca di Credito Finanziario has been making. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Mediobanca Banca di Credito Finanziario that you should be aware of before investing. Is Mediobanca Banca di Credito Finanziario not quite the opportunity you were looking for? Why not check out our selection of top 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.