Infrastrutture Wireless Italiane (BIT:INW) Will Pay A Larger Dividend Than Last Year At €0.32

Infrastrutture Wireless Italiane S.p.A. (BIT:INW) will increase its dividend on the 25th of May to €0.32. Although the dividend is now higher, the yield is only 3.2%, which is below the industry average.

View our latest analysis for Infrastrutture Wireless Italiane

Infrastrutture Wireless Italiane Doesn't Earn Enough To Cover Its Payments

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Earnings per share is forecast to rise by 47.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 127%, which probably can't continue putting some pressure on the balance sheet.

Infrastrutture Wireless Italiane's Dividend Has Lacked Consistency

Looking back, Infrastrutture Wireless Italiane's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The first annual payment during the last 6 years was €0.095 in 2016, and the most recent fiscal year payment was €0.32. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings have grown at around 4.1% a year for the past five years, which isn't massive but still better than seeing them shrink. The earnings growth is anaemic, and the company is paying out 162% of its profit. Limited recent earnings growth and a high payout ratio makes it hard for us to envision strong future dividend growth, unless the company should have substantial pricing power or some form of competitive advantage.

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 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing 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. 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.