Infrastrutture Wireless Italiane S.p.A. (BIT:INW) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 18th of May will not receive the dividend, which will be paid on the 20th of May.
Infrastrutture Wireless Italiane's next dividend payment will be €0.13 per share. Last year, in total, the company distributed €0.13 to shareholders. Based on the last year's worth of payments, Infrastrutture Wireless Italiane has a trailing yield of 1.4% on the current stock price of €9.57. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Infrastrutture Wireless Italiane is paying out an acceptable 57% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 53% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that Infrastrutture Wireless Italiane's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Infrastrutture Wireless Italiane's earnings per share have risen 12% per annum over the last five years. Infrastrutture Wireless Italiane has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Infrastrutture Wireless Italiane has delivered an average of 8.7% per year annual increase in its dividend, based on the past four years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
From a dividend perspective, should investors buy or avoid Infrastrutture Wireless Italiane? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Infrastrutture Wireless Italiane's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 57% and 53% respectively. All things considered, we are not particularly enthused about Infrastrutture Wireless Italiane from a dividend perspective.
So while Infrastrutture Wireless Italiane looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 1 warning sign for Infrastrutture Wireless Italiane that we recommend you consider before investing in the business.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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