Italtile (JSE:ITE) Has Announced A Dividend Of ZAR0.27
Italtile Limited (JSE:ITE) has announced that it will pay a dividend of ZAR0.27 per share on the 11th of March. Despite the cut, the dividend yield of 4.8% will still be comparable to other companies in the industry.
Check out our latest analysis for Italtile
Italtile's Payment Has Solid Earnings Coverage
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Italtile's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share could rise by 3.5% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty 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. The dividend has gone from an annual total of ZAR0.16 in 2014 to the most recent total annual payment of ZAR0.53. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
The Dividend's Growth Prospects Are Limited
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been crawling upwards at 3.5% per year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.
Our Thoughts On Italtile's Dividend
Overall, we think that Italtile could make a reasonable income stock, even though it did cut the dividend this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Italtile 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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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.