ENAV's (BIT:ENAV) Shareholders Will Receive A Bigger Dividend Than Last Year

ENAV S.p.A. (BIT:ENAV) will increase its dividend from last year's comparable payment on the 25th of October to €0.1967. This will take the annual payment to 4.9% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for ENAV

ENAV's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the company was paying out 101% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 68%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Earnings per share is forecast to rise by 41.7% over the next year. 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 implies that the company grew its distributions at a yearly rate of about 1.9% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

ENAV's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. ENAV's earnings per share is up 80% on last year. It's nice to see earnings per share rising, but one year is too short a period to get excited about. Were this trend to continue, we'd be interested. EPS has been growing well, but ENAV has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain. We do note though, one year is too short a time to be drawing strong conclusions about a company's future prospects.

In Summary

Overall, we always like to see the dividend being raised, but we don't think ENAV will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

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. Taking the debate a bit further, we've identified 1 warning sign for ENAV that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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