BFF Bank (BIT:BFF) Will Pay A Smaller Dividend Than Last Year

BFF Bank S.p.A. (BIT:BFF) is reducing its dividend from last year's comparable payment to €0.419 on the 26th of April. The dividend yield of 8.5% is still a nice boost to shareholder returns, despite the cut.

See our latest analysis for BFF Bank

BFF Bank's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the dividend made up 447% of earnings, and the company was generating negative free cash flows. This high of a dividend payment could start to put pressure on the balance sheet in the future.

Over the next year, EPS is forecast to expand by 5.2%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 69% which brings it into quite a comfortable range.

BFF Bank's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2018, the dividend has gone from €0.492 total annually to €0.791. This implies that the company grew its distributions at a yearly rate of about 10.0% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. BFF Bank might have put its house in order since then, but we remain cautious.

BFF Bank Might Find It Hard To Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that BFF Bank has grown earnings per share at 17% per year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

BFF Bank's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. Strong earnings growth means BFF Bank has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. This company is not in the top tier of income providing stocks.

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 BFF Bank (of which 1 shouldn't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.