Recordati Industria Chimica e Farmaceutica (BIT:REC) Is Increasing Its Dividend To €0.60

Recordati Industria Chimica e Farmaceutica S.p.A.'s (BIT:REC) dividend will be increasing from last year's payment of the same period to €0.60 on 24th of May. This will take the annual payment to 2.9% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Recordati Industria Chimica e Farmaceutica

Recordati Industria Chimica e Farmaceutica's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Recordati Industria Chimica e Farmaceutica'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 grow by 5.3% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 77% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Recordati Industria Chimica e Farmaceutica Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was €0.30 in 2013, and the most recent fiscal year payment was €1.15. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Recordati Industria Chimica e Farmaceutica May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately, Recordati Industria Chimica e Farmaceutica's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 1.8% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

We Really Like Recordati Industria Chimica e Farmaceutica's Dividend

Overall, a dividend increase is always good, and we think that Recordati Industria Chimica e Farmaceutica is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 Recordati Industria Chimica e Farmaceutica 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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