Arterra Bioscience (BIT:ARBS) Is Paying Out A Larger Dividend Than Last Year

The board of Arterra Bioscience S.p.A. (BIT:ARBS) has announced that it will be increasing its dividend by 30% on the 7th of May to €0.13, up from last year's comparable payment of €0.10. This will take the annual payment to 4.6% of the stock price, which is above what most companies in the industry pay.

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Arterra Bioscience'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. Based on the last payment, Arterra Bioscience was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

If the company can't turn things around, EPS could fall by 5.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 89%, which is definitely on the higher side.

See our latest analysis for Arterra Bioscience

Arterra Bioscience Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. Since 2022, the annual payment back then was €0.05, compared to the most recent full-year payment of €0.10. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Dividend Growth May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, Arterra Bioscience's earnings per share has shrunk at approximately 5.9% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On Arterra Bioscience's Dividend

Overall, we always like to see the dividend being raised, but we don't think Arterra Bioscience will make a great income stock. 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.

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. For example, we've picked out 2 warning signs for Arterra Bioscience that investors should know about before committing capital to this stock. Is Arterra Bioscience 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.