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

Zignago Vetro S.p.A. (BIT:ZV) will increase its dividend from last year's comparable payment on the 17th of May to €0.60. This makes the dividend yield about the same as the industry average at 3.2%.

View our latest analysis for Zignago Vetro

Zignago Vetro's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Zignago Vetro's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Over the next year, EPS is forecast to expand 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.

Zignago Vetro Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was €0.282 in 2013, and the most recent fiscal year payment was €0.60. This means that it has been growing its distributions at 7.8% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

We Could See Zignago Vetro's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend 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

In summary, while it's always good to see the dividend being raised, we don't think Zignago Vetro's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 2 warning signs for Zignago Vetro that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.