Zignago Vetro (BIT:ZV) Is Paying Out A Larger Dividend Than Last Year

Zignago Vetro S.p.A. (BIT:ZV) has announced that it will be increasing its dividend on the 11th of May to €0.40. This will take the annual payment from 3.3% to 3.3% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Zignago Vetro

Zignago Vetro's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last dividend, Zignago Vetro is earning enough to cover the payment, but the it makes up 123% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS is forecast to fall by 24.1%. If recent patterns in the dividend continue, we could see the payout ratio reaching 86% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Zignago Vetro Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the dividend has gone from €0.27 to €0.40. This implies that the company grew its distributions at a yearly rate of about 3.9% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Zignago Vetro has impressed us by growing EPS at 14% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Zignago Vetro's payments are rock solid. While Zignago Vetro is earning enough to cover the payments, the cash flows are lacking. 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. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Zignago Vetro that investors need to be conscious of moving forward. Is Zignago Vetro not quite the opportunity you were looking for? Why not check out our selection of top 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.