Stock Analysis

Zignago Vetro (BIT:ZV) Is Increasing Its Dividend To €0.60

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Zignago Vetro S.p.A.'s (BIT:ZV) periodic dividend will be increasing on the 17th of May to €0.60, with investors receiving 50% more than last year's €0.40. Even though the dividend went up, the yield is still quite low at only 2.4%.

View our latest analysis for Zignago Vetro

Zignago Vetro's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, Zignago Vetro's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

The next year is set to see EPS grow by 77.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 54%, which is in the range that makes us comfortable with the sustainability of the dividend.

BIT:ZV Historic Dividend March 19th 2023

Zignago Vetro Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from €0.282 total annually to €0.40. This works out to be a compound annual growth rate (CAGR) of approximately 3.6% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Zignago Vetro has seen EPS rising for the last five years, at 9.2% per annum. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Zignago Vetro's Dividend

Overall, we always like to see the dividend being raised, but we don't think Zignago Vetro will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Zignago Vetro that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether Zignago Vetro is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About BIT:ZV

Zignago Vetro

Zignago Vetro S.p.A., together with its subsidiaries, engages in the production, marketing, and sale of hollow glass containers in Italy, rest of Europe, and internationally.

Reasonable growth potential with adequate balance sheet and pays a dividend.