Italmobiliare (BIT:ITM) Is Paying Out A Larger Dividend Than Last Year

Italmobiliare S.p.A.'s (BIT:ITM) dividend will be increasing to €1.40 on 11th of May. This takes the dividend yield from 2.3% to 4.6%, which shareholders will be pleased with.

View our latest analysis for Italmobiliare

Italmobiliare Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Italmobiliare's dividend was only 30% of earnings, however it was paying out 101% of free cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Over the next year, EPS is forecast to fall by 36.7%. If the dividend continues along recent trends, we estimate the payout ratio could reach 110%, which could put the dividend in jeopardy if the company's earnings don't improve.

Italmobiliare Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from €0.075 in 2014 to the most recent annual payment of €0.70. This works out to be a compound annual growth rate (CAGR) of approximately 32% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Italmobiliare has grown earnings per share at 17% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Italmobiliare's prospects of growing its dividend payments in the future.

Our Thoughts On Italmobiliare's Dividend

Overall, we always like to see the dividend being raised, but we don't think Italmobiliare will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Italmobiliare (of which 1 is significant!) you should know about. Is Italmobiliare 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.