Infrastrutture Wireless Italiane's (BIT:INW) Upcoming Dividend Will Be Larger Than Last Year's

Infrastrutture Wireless Italiane S.p.A. (BIT:INW) has announced that it will be increasing its dividend on the 25th of May to €0.32. Despite this raise, the dividend yield of 3.1% is only a modest boost to shareholder returns.

See our latest analysis for Infrastrutture Wireless Italiane

Infrastrutture Wireless Italiane Is Paying Out More Than It Is Earning

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, the company was paying out 162% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

The next 12 months is set to see EPS grow by 49.6%. However, if the dividend continues growing along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 126% over the next year.

Infrastrutture Wireless Italiane's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. Since 2016, the dividend has gone from €0.095 to €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. However, Infrastrutture Wireless Italiane has only grown its earnings per share at 4.1% per annum over the past five years. The company is paying out a lot of its profits, even though it is growing those profits pretty slowly. As they say in finance, 'past performance is not indicative of future performance', but we are not confident a company with limited earnings growth and a high payout ratio will be a star dividend-payer over the next decade.

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. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. 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.

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.