Cembre (BIT:CMB) Is Paying Out A Larger Dividend Than Last Year

Cembre S.p.A. (BIT:CMB) will increase its dividend from last year's comparable payment on the 10th of May to €1.40. This will take the annual payment to 4.6% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Cembre

Cembre's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Cembre was paying out quite a large proportion of both earnings and cash flow, with the dividend being 158% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Looking forward, earnings per share is forecast to rise by 21.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 67% by next year, which is in a pretty sustainable range.

Cembre Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was €0.16, compared to the most recent full-year payment of €1.40. This means that it has been growing its distributions at 24% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

We Could See Cembre's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Cembre has impressed us by growing EPS at 7.0% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

Our Thoughts On Cembre's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Cembre's payments are rock solid. While Cembre is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Cembre that investors should take into consideration. Is Cembre 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.