Stock Analysis

IRCE's (BIT:IRC) Upcoming Dividend Will Be Larger Than Last Year's

Source: Shutterstock

IRCE S.p.A. (BIT:IRC) has announced that it will be increasing its periodic dividend on the 24th of May to €0.06, which will be 20% higher than last year's comparable payment amount of €0.05. This takes the dividend yield to 2.2%, which shareholders will be pleased with.

See our latest analysis for IRCE

IRCE's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, IRCE 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.

The next year is set to see EPS grow by 5.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 17% by next year, which is in a pretty sustainable range.

BIT:IRC Historic Dividend March 19th 2023

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was €0.06, compared to the most recent full-year payment of €0.05. Doing the maths, this is a decline of about 1.8% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. IRCE has seen EPS rising for the last five years, at 15% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for IRCE's prospects of growing its dividend payments in the future.

IRCE 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 company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 4 warning signs for IRCE that investors need to be conscious of moving forward. Is IRCE not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether IRCE is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis