doValue (BIT:DOV) Is Paying Out A Larger Dividend Than Last Year

The board of doValue S.p.A. (BIT:DOV) has announced that it will be paying its dividend of €0.60 on the 10th of May, an increased payment from last year's comparable dividend. This makes the dividend yield 9.5%, which is above the industry average.

View our latest analysis for doValue

doValue's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 69%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

doValue's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. Since 2018, the annual payment back then was €0.394, compared to the most recent full-year payment of €0.60. This means that it has been growing its distributions at 8.8% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. doValue's EPS has fallen by approximately 18% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

doValue's Dividend Doesn't Look Great

Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. The dividend doesn't inspire confidence that it will provide solid income in the future.

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. For example, we've picked out 2 warning signs for doValue that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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