Reti (BIT:RETI) Has Affirmed Its Dividend Of €0.058

Reti S.p.A. (BIT:RETI) has announced that it will pay a dividend of €0.058 per share on the 16th of April. This means the annual payment is 3.2% of the current stock price, which is above the average for the industry.

Reti's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment was quite easily covered by earnings, but it made up 109% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share could rise by 6.0% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 58% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Reti

Reti Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2021, the annual payment back then was €0.04, compared to the most recent full-year payment of €0.058. This implies that the company grew its distributions at a yearly rate of about 9.7% over that duration. Reti has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

We Could See Reti's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. Reti has impressed us by growing EPS at 6.0% per year over the past three years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Reti is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

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. Taking the debate a bit further, we've identified 3 warning signs for Reti that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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