Banca IFIS (BIT:IF) Is Increasing Its Dividend To €0.95

May 18, 2022
Source: Shutterstock

Banca IFIS S.p.A.'s (BIT:IF) dividend will be increasing to €0.95 on 25th of May. This takes the dividend yield from 5.4% to 12%, which shareholders will be pleased with.

See our latest analysis for Banca IFIS

Banca IFIS' Earnings Easily Cover the Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Banca IFIS was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Over the next year, EPS is forecast to expand by 6.2%. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 89%, which is on the higher side, but certainly still feasible.

BIT:IF Historic Dividend May 18th 2022

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the first annual payment was €0.25, compared to the most recent full-year payment of €0.95. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. 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 Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Banca IFIS' EPS has fallen by approximately 30% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Our Thoughts On Banca IFIS' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Banca IFIS' payments are rock solid. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Banca IFIS that you should be aware of before investing. Is Banca IFIS not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.