Banca Mediolanum (BIT:BMED) Will Pay A Dividend Of €0.37

Banca Mediolanum S.p.A. (BIT:BMED) has announced that it will pay a dividend of €0.37 per share on the 20th of November. This will take the dividend yield to an attractive 7.2%, providing a nice boost to shareholder returns.

See our latest analysis for Banca Mediolanum

Banca Mediolanum's Dividend Forecasted To Be Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Having paid out dividends for 9 years, Banca Mediolanum has a good history of paying out a part of its earnings to shareholders. Based on Banca Mediolanum's last earnings report, the payout ratio is at a decent 63%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to fall by 5.9%. Fortunately, analysts forecast the future payout ratio to be 68% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Banca Mediolanum's Dividend Has Lacked Consistency

Looking back, Banca Mediolanum's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 9 years was €0.28 in 2015, and the most recent fiscal year payment was €0.84. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Banca Mediolanum 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.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Banca Mediolanum has grown earnings per share at 28% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Banca Mediolanum could prove to be a strong dividend payer.

We Really Like Banca Mediolanum's Dividend

Overall, a dividend increase is always good, and we think that Banca Mediolanum is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Banca Mediolanum has 2 warning signs (and 1 which is a bit concerning) we think 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.