Arterra Bioscience's (BIT:ARBS) Dividend Will Be Increased To €0.13

The board of Arterra Bioscience S.p.A. (BIT:ARBS) has announced that it will be paying its dividend of €0.13 on the 7th of May, an increased payment from last year's comparable dividend. This makes the dividend yield 6.1%, which is above the industry average.

We've discovered 2 warning signs about Arterra Bioscience. View them for free.

Arterra Bioscience's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Arterra Bioscience's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 5.9% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 68%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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. The dividend has gone from an annual total of €0.05 in 2022 to the most recent total annual payment of €0.13. This implies that the company grew its distributions at a yearly rate of about 38% over that duration. Arterra Bioscience has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Arterra Bioscience's EPS has declined at around 5.9% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Arterra Bioscience's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Arterra Bioscience that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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