Italmobiliare (BIT:ITM) Is Increasing Its Dividend To €3.00

Italmobiliare S.p.A.'s (BIT:ITM) dividend will be increasing from last year's payment of the same period to €3.00 on 8th of May. Even though the dividend went up, the yield is still quite low at only 2.3%.

View our latest analysis for Italmobiliare

Italmobiliare Doesn't Earn Enough To Cover Its Payments

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Italmobiliare's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Earnings per share is forecast to rise by 80.3% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 122%, which is a bit high and could start applying pressure to the balance sheet.

Italmobiliare Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of €0.075 in 2014 to the most recent total annual payment of €0.80. This means that it has been growing its distributions at 27% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Italmobiliare has impressed us by growing EPS at 19% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

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 Italmobiliare that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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