Infrastrutture Wireless Italiane (BIT:INW) Is Increasing Its Dividend To €0.3467

The board of Infrastrutture Wireless Italiane S.p.A. (BIT:INW) has announced that it will be increasing its dividend by 7.5% on the 24th of May to €0.3467, up from last year's comparable payment of €0.323. Despite this raise, the dividend yield of 2.9% is only a modest boost to shareholder returns.

See our latest analysis for Infrastrutture Wireless Italiane

Infrastrutture Wireless Italiane's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, the company was paying out 127% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 51%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

EPS is set to grow by 58.9% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 83% which is a bit high but can definitely be sustainable.

Infrastrutture Wireless Italiane's Dividend Has Lacked Consistency

It's comforting to see that Infrastrutture Wireless Italiane has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the annual payment back then was €0.0945, compared to the most recent full-year payment of €0.323. This means that it has been growing its distributions at 19% per annum over that time. Infrastrutture Wireless Italiane has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Infrastrutture Wireless Italiane has grown earnings per share at 7.7% per year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Infrastrutture Wireless Italiane 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 would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.