Yahoo Finance Intertape Polymer Group Inc. (TSE:ITP) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
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 Intertape Polymer Group Inc. (TSE:ITP) is about to go ex-dividend in just 4 days. This means that investors who purchase shares on or after the 14th of September will not receive the dividend, which will be paid on the 30th of September.
Intertape Polymer Group's next dividend payment will be CA$0.15 per share, and in the last 12 months, the company paid a total of CA$0.59 per share. Based on the last year's worth of payments, Intertape Polymer Group stock has a trailing yield of around 5.2% on the current share price of CA$15.04. If you buy this business for its dividend, you should have an idea of whether Intertape Polymer Group's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Intertape Polymer Group
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Intertape Polymer Group paid out more than half (65%) of its earnings last year, which is a regular payout ratio for most companies. 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. Thankfully its dividend payments took up just 31% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Intertape Polymer 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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Intertape Polymer Group earnings per share are up 8.9% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past eight years, Intertape Polymer Group has increased its dividend at approximately 18% a year on average. 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.
To Sum It Up
Is Intertape Polymer Group worth buying for its dividend? Earnings per share growth has been modest and Intertape Polymer Group paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.
So while Intertape Polymer Group looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that Intertape Polymer Group is showing 4 warning signs in our investment analysis, and 1 of those is a bit unpleasant...
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.
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. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.
