Amplifon's (BIT:AMP) Upcoming Dividend Will Be Larger Than Last Year's

Amplifon S.p.A. (BIT:AMP) has announced that it will be increasing its dividend from last year's comparable payment on the 24th of May to €0.29. Despite this raise, the dividend yield of 1.0% is only a modest boost to shareholder returns.

See our latest analysis for Amplifon

Amplifon's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Amplifon's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 51.2% over the next year. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was €0.043, compared to the most recent full-year payment of €0.29. This means that it has been growing its distributions at 21% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Amplifon has seen EPS rising for the last five years, at 12% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Amplifon's prospects of growing its dividend payments in the future.

Amplifon Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Amplifon that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.