Infrastrutture Wireless Italiane (BIT:INW) Is Increasing Its Dividend To €0.48

Infrastrutture Wireless Italiane S.p.A. (BIT:INW) will increase its dividend from last year's comparable payment on the 22nd of May to €0.48. This will take the dividend yield to an attractive 4.8%, providing a nice boost to shareholder returns.

See our latest analysis for Infrastrutture Wireless Italiane

Infrastrutture Wireless Italiane Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

The next 12 months is set to see EPS grow by 44.7%. If the dividend continues on its recent course, the payout ratio in 12 months could be 107%, 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. The annual payment during the last 8 years was €0.0945 in 2016, and the most recent fiscal year payment was €0.48. This works out to be a compound annual growth rate (CAGR) of approximately 23% a year 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.

Infrastrutture Wireless Italiane May Have Challenges Growing 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. Infrastrutture Wireless Italiane has impressed us by growing EPS at 8.9% 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.

Infrastrutture Wireless Italiane's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Infrastrutture Wireless Italiane will make a great income stock. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Infrastrutture Wireless Italiane that investors need to be conscious of moving forward. 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.