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

Infrastrutture Wireless Italiane S.p.A.'s (BIT:INW) dividend will be increasing from last year's payment of the same period to €0.48 on 22nd of May. This will take the dividend yield to an attractive 4.7%, providing a nice boost to shareholder returns.

View our latest analysis for Infrastrutture Wireless Italiane

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 135% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Earnings per share is forecast to rise by 45.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 107%, which probably can't continue without 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. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2016, the dividend has gone from €0.0945 total annually to €0.48. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. 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.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Infrastrutture Wireless Italiane has impressed us by growing EPS at 8.9% per year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

Infrastrutture Wireless Italiane's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Infrastrutture Wireless Italiane's payments are rock solid. Strong earnings growth means Infrastrutture Wireless Italiane has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. 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.