Infrastrutture Wireless Italiane (BIT:INW) Is Increasing Its Dividend To €0.32

The board of Infrastrutture Wireless Italiane S.p.A. (BIT:INW) has announced that it will be increasing its dividend on the 25th of May to €0.32. Despite this raise, the dividend yield of 3.1% is only a modest boost to shareholder returns.

Check out our latest analysis for Infrastrutture Wireless Italiane

Infrastrutture Wireless Italiane Is Paying Out More Than It Is Earning

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Earnings per share is forecast to rise by 40.4% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 119%, which is a bit high and could start applying pressure to the balance sheet.

Infrastrutture Wireless Italiane's Dividend Has Lacked Consistency

Looking back, Infrastrutture Wireless Italiane's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2016, the dividend has gone from €0.095 to €0.32. This means that it has been growing its distributions at 23% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Infrastrutture Wireless Italiane has impressed us by growing EPS at 5.5% per year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Infrastrutture Wireless Italiane's payments are rock solid. The track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Infrastrutture Wireless Italiane that investors should know about before committing capital to this stock. Is Infrastrutture Wireless Italiane not quite the opportunity you were looking for? Why not check out our selection of top 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.