Banca Mediolanum's (BIT:BMED) Dividend Will Be Increased To €0.63

Banca Mediolanum S.p.A. (BIT:BMED) will increase its dividend from last year's comparable payment on the 24th of April to €0.63. This will take the dividend yield to an attractive 5.9%, providing a nice boost to shareholder returns.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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

If the payments aren't sustainable, a high yield for a few years won't matter that much.

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 50%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to fall by 12.9% over the next 3 years. 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.

Check out our latest analysis for Banca Mediolanum

Banca Mediolanum's Dividend Has Lacked Consistency

Looking back, Banca Mediolanum's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2016, the dividend has gone from €0.28 total annually to €0.75. This means that it has been growing its distributions at 12% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

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 15% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

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. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Banca Mediolanum (of which 1 is a bit concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.