Yahoo Finance Interested In Servizi Italia S.p.A.'s (BIT:SRI) Upcoming €0.14 Dividend? You Have 4 Days Left
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Servizi Italia S.p.A. (BIT:SRI) is about to go ex-dividend in just 4 days. If you purchase the stock on or after the 11th of May, you won't be eligible to receive this dividend, when it is paid on the 13th of May.
Servizi Italia's upcoming dividend is €0.14 a share, following on from the last 12 months, when the company distributed a total of €0.14 per share to shareholders. Last year's total dividend payments show that Servizi Italia has a trailing yield of 5.0% on the current share price of €2.8. 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! So we need to investigate whether Servizi Italia can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Servizi Italia
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Servizi Italia paid out a comfortable 49% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 74% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that Servizi Italia'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.
Click here to see how much of its profit Servizi Italia paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Servizi Italia's earnings per share have dropped 9.8% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Servizi Italia's dividend payments per share have declined at 2.5% per year on average over the past ten years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
The Bottom Line
Is Servizi Italia worth buying for its dividend? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. Overall, it's hard to get excited about Servizi Italia from a dividend perspective.
With that being said, if dividends aren't your biggest concern with Servizi Italia, you should know about the other risks facing this business. For example, Servizi Italia has 6 warning signs (and 1 which is potentially serious) we think you should know about.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
