ENAV (BIT:ENAV) Is Increasing Its Dividend To €0.1967

The board of ENAV S.p.A. (BIT:ENAV) has announced that it will be paying its dividend of €0.1967 on the 25th of October, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 5.1%, providing a nice boost to shareholder returns.

View our latest analysis for ENAV

ENAV's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 101% of what it was earning and 78% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

Over the next year, EPS is forecast to expand by 16.9%. If recent patterns in the dividend continues, the payout ratio in 12 months could be 85% which is a bit high but can definitely be sustainable.

ENAV's Dividend Has Lacked Consistency

ENAV has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of €0.176 in 2017 to the most recent total annual payment of €0.1967. This means that it has been growing its distributions at 1.9% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

ENAV May Find It Hard To Grow 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. ENAV hasn't seen much change in its earnings per share over the last five years. So the company has struggled to grow its EPS yet it's still paying out 101% of its earnings. 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

In summary, while it's always good to see the dividend being raised, we don't think ENAV's payments are rock solid. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think ENAV 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for ENAV that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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