Mediobanca Banca di Credito Finanziario's (BIT:MB) Upcoming Dividend Will Be Larger Than Last Year's

The board of Mediobanca Banca di Credito Finanziario S.p.A. (BIT:MB) has announced that it will be paying its dividend of €0.85 on the 22nd of November, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 6.8%, providing a nice boost to shareholder returns.

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

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Mediobanca Banca di Credito Finanziario has a good history of paying out dividends, with its current track record at 9 years. Past distributions do not necessarily guarantee future ones, but Mediobanca Banca di Credito Finanziario's payout ratio of 70% is a good sign for current shareholders as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 31.9% over the next 3 years. 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

Looking back, Mediobanca Banca di Credito Finanziario's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2014, the annual payment back then was €0.15, compared to the most recent full-year payment of €0.85. This works out to be a compound annual growth rate (CAGR) of approximately 21% 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.

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

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 per share has been crawling upwards at 4.4% per year. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

Our Thoughts On Mediobanca Banca di Credito Finanziario's Dividend

Overall, it's great to see the dividend being raised and that it is still 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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