Yahoo Finance Only Four Days Left To Cash In On Intertek Group's (LON:ITRK) Dividend
Intertek Group plc (LON:ITRK) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Intertek Group's shares on or after the 30th of May will not receive the dividend, which will be paid on the 21st of June.
The company's upcoming dividend is UK£0.74 a share, following on from the last 12 months, when the company distributed a total of UK£1.12 per share to shareholders. Last year's total dividend payments show that Intertek Group has a trailing yield of 2.2% on the current share price of UK£50.25. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Intertek Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Intertek Group paid out 61% of its earnings to investors last year, a normal payout level for most businesses. 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. Thankfully its dividend payments took up just 42% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Intertek Group'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 the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Intertek Group's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Intertek Group has lifted its dividend by approximately 10% a year on average.
To Sum It Up
Should investors buy Intertek Group for the upcoming dividend? Earnings per share have been flat and Intertek Group's dividend payouts are within reasonable limits; without a sharp decline in earnings we feel that the dividend is likely somewhat sustainable. All things considered, we are not particularly enthused about Intertek Group from a dividend perspective.
While it's tempting to invest in Intertek Group for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for Intertek Group you should know about.
If you're in the market for strong dividend payers, we recommend checking 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.
