Zignago Vetro's (BIT:ZV) Shareholders Will Receive A Smaller Dividend Than Last Year

Zignago Vetro S.p.A. (BIT:ZV) is reducing its dividend from last year's comparable payment to €0.45 on the 14th of May. This means the annual payment is 5.1% of the current stock price, which is above the average for the industry.

We've discovered 3 warning signs about Zignago Vetro. View them for free.

Zignago Vetro's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Zignago Vetro's dividend made up quite a large proportion of earnings but only 61% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

The next year is set to see EPS grow by 44.4%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 59% which would be quite comfortable going to take the dividend forward.

View our latest analysis for Zignago Vetro

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of €0.20 in 2015 to the most recent total annual payment of €0.45. This implies that the company grew its distributions at a yearly rate of about 8.4% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Zignago Vetro May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Zignago Vetro hasn't seen much change in its earnings per share over the last five years.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. 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 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.