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

Infrastrutture Wireless Italiane S.p.A. (BIT:INW) will increase its dividend from last year's comparable payment on the 24th of May to €0.3467. Even though the dividend went up, the yield is still quite low at only 2.9%.

Check out our latest analysis for Infrastrutture Wireless Italiane

Infrastrutture Wireless Italiane's Earnings Easily Cover The Distributions

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 higher than its profits, and made up 92% of cash flows. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

Earnings per share is forecast to rise by 58.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 83%, which is on the higher side, but certainly still feasible.

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 €0.3467. This means that it has been growing its distributions at 20% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

There Isn't Much Room To Grow The Dividend

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. It's encouraging to see that Infrastrutture Wireless Italiane has been growing its earnings per share at 7.7% a year over the past five years. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Infrastrutture Wireless Italiane will make a great income stock. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think Infrastrutture Wireless Italiane 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. 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 Infrastrutture Wireless Italiane that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.