Zignago Vetro's (BIT:ZV) Shareholders Will Receive A Bigger 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 makes the dividend yield 3.6%, which is above the industry average.

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. Zignago Vetro's stock price has reduced by 32% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

See our latest analysis for Zignago Vetro

Zignago Vetro's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Zignago Vetro's dividend was only 58% of earnings, however it was paying out 123% of free 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.

Looking forward, earnings per share is forecast to fall by 24.1% over the next year. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 86%, meaning that most of the company's earnings are being paid out to shareholders.

Zignago Vetro Has A Solid Track Record

The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was €0.27 in 2012, and the most recent fiscal year payment was €0.40. This works out to be a compound annual growth rate (CAGR) of approximately 3.9% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Looks Likely To Grow

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

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. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

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. As an example, we've identified 3 warning signs for Zignago Vetro that you should be aware of before investing. 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.