Danieli & C. Officine Meccaniche (BIT:DAN) Has Announced That It Will Be Increasing Its Dividend To €0.2793

Danieli & C. Officine Meccaniche S.p.A. (BIT:DAN) has announced that it will be increasing its dividend from last year's comparable payment on the 23rd of November to €0.2793. The payment will take the dividend yield to 1.3%, which is in line with the average for the industry.

View our latest analysis for Danieli & C. Officine Meccaniche

Danieli & C. Officine Meccaniche's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Danieli & C. Officine Meccaniche was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 3.4% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 11%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the annual payment back then was €0.33, compared to the most recent full-year payment of €0.2793. This works out to be a decline of approximately 1.7% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Danieli & C. Officine Meccaniche has impressed us by growing EPS at 34% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Danieli & C. Officine Meccaniche Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend 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. As an example, we've identified 1 warning sign for Danieli & C. Officine Meccaniche that you should be aware of before investing. Is Danieli & C. Officine Meccaniche not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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