Banca Generali's (BIT:BGN) Dividend Will Be Increased To €2.15

Banca Generali S.p.A.'s (BIT:BGN) periodic dividend will be increasing on the 21st of May to €2.15, with investors receiving 39% more than last year's €1.55. This takes the dividend yield to 5.6%, which shareholders will be pleased with.

Check out our latest analysis for Banca Generali

Banca Generali's Earnings Will Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is 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. Past distributions do not necessarily guarantee future ones, but Banca Generali's payout ratio of 74% is a good sign as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to fall by 1.9% over the next 3 years. Fortunately, the future payout ratio could reach 77% in the same 3 years as estimated by analysts, which is on the higher side, but certainly still feasible.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from €0.98 total annually to €2.80. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Banca Generali has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

We Could See Banca Generali's Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Banca Generali has been growing its earnings per share at 10.0% a year over the past five years. 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, this is probably not a great income stock, even though the dividend is being raised at the moment. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. Overall, we don't think this company has the makings of a good income stock.

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 doesn't sit too well with us!) you should know about. 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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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.