Mediobanca Banca di Credito Finanziario's (BIT:MB) Dividend Will Be Increased To €0.85

Mediobanca Banca di Credito Finanziario S.p.A. (BIT:MB) has announced that it will be increasing its dividend from last year's comparable payment on the 22nd of November to €0.85. This will take the dividend yield to an attractive 6.9%, providing a nice boost to shareholder returns.

Check out our latest analysis for Mediobanca Banca di Credito Finanziario

Mediobanca Banca di Credito Finanziario's Payment Expected To Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Mediobanca Banca di Credito Finanziario has a good history of paying out dividends, with its current track record at 9 years. Taking data from its last earnings report, calculating for the company's payout ratio of 70%shows that Mediobanca Banca di Credito Finanziario would be able to pay its last dividend without pressure on the balance sheet.

Over the next 3 years, EPS is forecast to expand by 32.0%. Analysts estimate the future payout ratio will be 71% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Mediobanca Banca di Credito Finanziario's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. Since 2014, the annual payment back then was €0.15, compared to the most recent full-year payment of €0.85. This implies that the company grew its distributions at a yearly rate of about 21% 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.

Mediobanca Banca di Credito Finanziario May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings have grown at around 4.4% a year for the past five years, which isn't massive but still better than seeing them shrink. The company has been growing at a pretty soft 4.4% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Mediobanca Banca di Credito Finanziario's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Mediobanca Banca di Credito Finanziario that investors should know about before committing capital to this stock. 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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