Recordati Industria Chimica e Farmaceutica's (BIT:REC) Dividend Will Be Increased To €0.67

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 €0.67 on 21st of May. This makes the dividend yield about the same as the industry average at 2.4%.

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Recordati Industria Chimica e Farmaceutica's Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Recordati Industria Chimica e Farmaceutica's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 46.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 47% by next year, which is in a pretty sustainable range.

See our latest analysis for Recordati Industria Chimica e Farmaceutica

Recordati Industria Chimica e Farmaceutica Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was €0.37, compared to the most recent full-year payment of €1.27. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Earnings per share has been crawling upwards at 2.3% per year. Growth of 2.3% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Recordati Industria Chimica e Farmaceutica's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Recordati Industria Chimica e Farmaceutica's payments are rock solid. While Recordati Industria Chimica e Farmaceutica is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

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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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.