Mediobanca Banca di Credito Finanziario (BIT:MB) Is Paying Out A Larger Dividend Than Last Year

Mediobanca Banca di Credito Finanziario S.p.A.'s (BIT:MB) dividend will be increasing from last year's payment of the same period to €0.75 on 23rd of November. This will take the dividend yield to an attractive 9.4%, providing a nice boost to shareholder returns.

Check out our latest analysis for Mediobanca Banca di Credito Finanziario

Mediobanca Banca di Credito Finanziario's Earnings Will Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

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 72%, which means that Mediobanca Banca di Credito Finanziario would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, earnings per share is forecast to fall by 4.1% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 69% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was €0.17 in 2012, and the most recent fiscal year payment was €0.75. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Mediobanca Banca di Credito Finanziario has only grown its earnings per share at 4.0% per annum over the past five years. Slow growth and a high payout ratio could mean that Mediobanca Banca di Credito Finanziario has maxed out the amount that it has been able to pay to shareholders. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Mediobanca Banca di Credito Finanziario will make a great income stock. 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. Overall, we don't think this company has the makings of a good income 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. Case in point: We've spotted 2 warning signs for Mediobanca Banca di Credito Finanziario (of which 1 is concerning!) you should know about. 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.