Mediobanca Banca di Credito Finanziario's (BIT:MB) Shareholders Will Receive A Bigger Dividend Than Last Year

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 makes the dividend yield 8.0%, which is above the industry average.

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 established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. Based on Mediobanca Banca di Credito Finanziario's last earnings report, the payout ratio is at a decent 70%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 19.2%. Analysts forecast the future payout ratio could be 71% over the same time horizon, which is a number we think the company can maintain.

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 makes us cautious about the consistency of the dividend over a full economic cycle. Since 2014, the dividend has gone from €0.15 total annually to €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.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Mediobanca Banca di Credito Finanziario has seen EPS rising for the last five years, at 7.2% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing 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. If you are a dividend investor, you might also want to look at our curated list of high yield 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.