Danieli & C. Officine Meccaniche's (BIT:DAN) Upcoming Dividend Will Be Larger Than Last Year's

The board of Danieli & C. Officine Meccaniche S.p.A. (BIT:DAN) has announced that it will be increasing its dividend on the 24th of November to €0.17. Based on the announced payment, the dividend yield for the company will be 0.6%, which is fairly typical for the industry.

See our latest analysis for Danieli & C. Officine Meccaniche

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

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Danieli & C. Officine Meccaniche's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 73.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 8.8%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was €0.33 in 2011, and the most recent fiscal year payment was €0.17. Doing the maths, this is a decline of about 6.4% per year. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. However, Danieli & C. Officine Meccaniche's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Danieli & C. Officine Meccaniche's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Given that earnings are not growing, the dividend does not look nearly so attractive. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 4 analysts we track are forecasting for the future. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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.

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