Datalogic (BIT:DAL) Will Pay A Dividend Of €0.12

The board of Datalogic S.p.A. (BIT:DAL) has announced that it will pay a dividend on the 16th of July, with investors receiving €0.12 per share. This payment means that the dividend yield will be 2.7%, which is around the industry average.

Datalogic's Future Dividend Projections Appear Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last dividend was quite comfortably covered by Datalogic's earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Looking forward, earnings per share is forecast to rise by 54.4% over the next year. If the dividend continues on this path, the payout ratio could be 28% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Datalogic

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of €0.18 in 2015 to the most recent total annual payment of €0.12. This works out to be a decline of approximately 4.0% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Datalogic's earnings per share has shrunk at 20% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Datalogic has been making. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Datalogic 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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