Banca Generali (BIT:BGN) Is Increasing Its Dividend To €2.15

Banca Generali S.p.A. (BIT:BGN) will increase its dividend on the 21st of May to €2.15, which is 39% higher than last year's payment from the same period of €1.55. This will take the dividend yield to an attractive 5.6%, providing a nice boost to shareholder returns.

Check out our latest analysis for Banca Generali

Banca Generali's Payment Expected To Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having distributed dividends for at least 10 years, Banca Generali has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 74%, which means that Banca Generali would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, earnings per share is forecast to fall by 1.9% over the next 3 years. However, analysts forecast that the future payout ratio could reach 77% over the same time period. This is definitely on the higher side of what we consider sustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was €0.95 in 2015, and the most recent fiscal year payment was €2.80. This means that it has been growing its distributions at 11% 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.

Banca Generali Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Banca Generali has seen EPS rising for the last five years, at 10.0% per annum. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Banca Generali will make a great income stock. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think Banca Generali is a great stock to add to your portfolio if income is your focus.

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. Case in point: We've spotted 2 warning signs for Banca Generali (of which 1 is concerning!) you should know about. Is Banca Generali 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.