Directa Sim's (BIT:D) Upcoming Dividend Will Be Larger Than Last Year's

Directa Sim S.p.A.'s (BIT:D) periodic dividend will be increasing on the 21st of May to €0.30, with investors receiving 76% more than last year's €0.17. Although the dividend is now higher, the yield is only 3.4%, which is below the industry average.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Directa Sim's Future Dividend Projections Appear Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Directa Sim's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 88.0% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 47% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Directa Sim

Directa Sim Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2022, the annual payment back then was €0.15, compared to the most recent full-year payment of €0.17. This means that it has been growing its distributions at 4.3% per annum over that time. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. The business has been going well, which we can see by the fact that EPS has risen by 88% in the last year. We're glad to see EPS up on last year, but we're conscious that growth rates typically slow as companies increase in size. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future. Any one year of performance can be misleading for a variety of reasons, so we wouldn't like to form any strong conclusions based on these numbers alone.

We Really Like Directa Sim's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Directa Sim that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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.