Unipol Gruppo (BIT:UNI) Is Paying Out A Larger Dividend Than Last Year

Unipol Gruppo S.p.A.'s (BIT:UNI) dividend will be increasing from last year's payment of the same period to €0.38 on 22nd of May. This makes the dividend yield about the same as the industry average at 4.6%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Unipol Gruppo's stock price has increased by 47% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Unipol Gruppo

Unipol Gruppo's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Unipol Gruppo's dividend was only 25% of earnings, however it was paying out 112% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

EPS is set to fall by 18.1% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 34%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from €0.162 total annually to €0.38. This works out to be a compound annual growth rate (CAGR) of approximately 8.9% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Unipol Gruppo might have put its house in order since then, but we remain cautious.

Unipol Gruppo Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Unipol Gruppo has seen EPS rising for the last five years, at 9.2% per annum. Unipol Gruppo definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Unipol Gruppo will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 4 warning signs for Unipol Gruppo you should be aware of, and 1 of them is potentially serious. 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.