Yahoo Finance ITV (LON:ITV) Will Pay A Dividend Of £0.017
The board of ITV plc (LON:ITV) has announced that it will pay a dividend on the 28th of November, with investors receiving £0.017 per share. This means the annual payment is 7.0% of the current stock price, which is above the average for the industry.
View our latest analysis for ITV
ITV's Earnings Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, ITV's dividend made up quite a large proportion of earnings but only 70% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.
The next year is set to see EPS grow by 37.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 53% by next year, which is in a pretty sustainable range.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was £0.026, compared to the most recent full-year payment of £0.05. This implies that the company grew its distributions at a yearly rate of about 6.8% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
Dividend Growth Is Doubtful
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, ITV's earnings per share has shrunk at approximately 8.0% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
Our Thoughts On ITV's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about ITV's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for ITV 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.
