Caltagirone's (BIT:CALT) Upcoming Dividend Will Be Larger Than Last Year's

Caltagirone SpA (BIT:CALT) has announced that it will be increasing its dividend on the 25th of May to €0.10. Although the dividend is now higher, the yield is only 2.5%, which is below the industry average.

Check out our latest analysis for Caltagirone

Caltagirone's Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Caltagirone'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 3.8% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 14%, which is definitely feasible to continue.

Caltagirone Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from €0.03 in 2012 to the most recent annual payment of €0.10. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, Caltagirone's earnings per share has shrunk at approximately 3.8% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On Caltagirone's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Caltagirone that investors should know about before committing capital to this stock. 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.