Cellularline (BIT:CELL) Is Increasing Its Dividend To €0.093

The board of Cellularline S.p.A. (BIT:CELL) has announced that it will be increasing its dividend by 6.9% on the 21st of May to €0.093, up from last year's comparable payment of €0.087. This will take the annual payment to 3.6% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Cellularline

Cellularline's Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Cellularline was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 21.5% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 34%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Cellularline's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. The annual payment during the last 6 years was €0.30 in 2019, and the most recent fiscal year payment was €0.093. Dividend payments have fallen sharply, down 69% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Cellularline's earnings per share has shrunk at 22% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Cellularline 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 don't think Cellularline is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Cellularline that investors should take into consideration. 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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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.