Leonardo (BIT:LDO) Is Paying Out A Larger Dividend Than Last Year

Leonardo S.p.a. (BIT:LDO) has announced that it will be increasing its dividend from last year's comparable payment on the 25th of June to €0.52. Even though the dividend went up, the yield is still quite low at only 1.0%.

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Leonardo's Future Dividend Projections Appear Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Leonardo'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.

Over the next year, EPS is forecast to expand by 55.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 22%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Leonardo

Leonardo's Dividend Has Lacked Consistency

It's comforting to see that Leonardo has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2017, the dividend has gone from €0.14 total annually to €0.52. This means that it has been growing its distributions at 18% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Leonardo has grown earnings per share at 11% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Leonardo's Dividend

Overall, a dividend increase is always good, and we think that Leonardo is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Leonardo that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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