DiaSorin's (BIT:DIA) Shareholders Will Receive A Bigger Dividend Than Last Year

DiaSorin S.p.A.'s (BIT:DIA) dividend will be increasing to €1.05 on 25th of May. Despite this raise, the dividend yield of 0.9% is only a modest boost to shareholder returns.

View our latest analysis for DiaSorin

DiaSorin'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, DiaSorin'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.

EPS is set to fall by 26.3% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 27%, which we are pretty comfortable with and we think is feasible on an earnings basis.

DiaSorin Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the first annual payment was €0.46, compared to the most recent full-year payment of €1.05. This works out to be a compound annual growth rate (CAGR) of approximately 8.6% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see DiaSorin has been growing its earnings per share at 23% a year over the past five years. 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.

DiaSorin Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 DiaSorin that you should be aware of before investing. 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.