Infrastrutture Wireless Italiane's (BIT:INW) Shareholders Will Receive A Bigger Dividend Than Last Year

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 25th of May to €0.32. Even though the dividend went up, the yield is still quite low at only 3.4%.

View our latest analysis for Infrastrutture Wireless Italiane

Infrastrutture Wireless Italiane Is Paying Out More Than It Is Earning

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

EPS is forecast to rise very quickly over the next 12 months. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 126%, which is unsustainable.

Infrastrutture Wireless Italiane's Dividend Has Lacked Consistency

Infrastrutture Wireless Italiane has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from €0.095 in 2016 to the most recent annual payment of €0.30. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year 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.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Infrastrutture Wireless Italiane's EPS has fallen by approximately 23% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Infrastrutture Wireless Italiane's Dividend Doesn't Look Great

Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. The dividend doesn't inspire confidence that it will provide solid income in the future.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Infrastrutture Wireless Italiane (1 is a bit concerning!) that you should be aware of before investing. 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.