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

Ascopiave S.p.A. (BIT:ASC) will increase its dividend from last year's comparable payment on the 8th of May to €0.14. This will take the annual payment to 5.9% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Ascopiave

Ascopiave Doesn't Earn Enough To Cover Its Payments

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Ascopiave's dividend was making up a very large proportion of earnings, and the company was also not generating any cash flow to offset this. Generally, we think that this would be a risky long term practice.

Looking forward, earnings per share is forecast to fall by 34.0% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 130%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was €0.11, compared to the most recent full-year payment of €0.14. This means that it has been growing its distributions at 2.4% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Ascopiave Might Find It Hard To Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Ascopiave has been growing its earnings per share at 24% a year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Ascopiave hasn't been doing.

Ascopiave's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Ascopiave's payments are rock solid. Strong earnings growth means Ascopiave has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Ascopiave has 3 warning signs (and 2 which make us uncomfortable) we think you should know about. Is Ascopiave not quite the opportunity you were looking for? Why not check out our selection of top 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.