Illinois Tool Works Inc's Dividend Analysis
Understanding the Dividend Dynamics of Illinois Tool Works Inc
Illinois Tool Works Inc (NYSE:ITW) recently announced a dividend of $1.4 per share, payable on 2024-04-11, with the ex-dividend date set for 2024-03-27. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Illinois Tool Works Inc's dividend performance and assess its sustainability.
What Does Illinois Tool Works Inc Do?
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Illinois Tool Works is a diversified global manufacturer that produces specialized industrial equipment, consumables, and related services. The firm operates 84 global divisions through seven distinct operating segments: automotive OEM, construction products, food equipment, specialty products, test/measurement and electronics, polymers and fluids, and welding. About half of its revenue comes from its operations in North America, with the remainder originating from international markets. Europe, the Middle East, and Africa is the next largest contributor at about 25% of revenue. ITW takes a bottom-up and decentralized approach to portfolio management, with the exception that each segment must apply its 80/20 operating process modeled on the Pareto principle.
A Glimpse at Illinois Tool Works Inc's Dividend History
Illinois Tool Works Inc has maintained a consistent dividend payment record since 1964, distributing dividends on a quarterly basis. The company is recognized as a dividend king, a prestigious title for companies that have increased their dividend each year for at least 50 years. Below is a chart showing annual Dividends Per Share to track historical trends.
Breaking Down Illinois Tool Works Inc's Dividend Yield and Growth
As of today, Illinois Tool Works Inc currently has a 12-month trailing dividend yield of 2.02% and a 12-month forward dividend yield of 2.08%, indicating an expectation of increased dividend payments over the next 12 months. Over the past three years, Illinois Tool Works Inc's annual dividend growth rate was 7.00%. On a five-year horizon, this rate increased to 8.20% per year. Over the past decade, the annual dividends per share growth rate stands at an impressive 13.90%.
Based on Illinois Tool Works Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Illinois Tool Works Inc stock as of today is approximately 3.00%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Illinois Tool Works Inc's dividend payout ratio is 0.55.
Illinois Tool Works Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Illinois Tool Works Inc's profitability 9 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
Illinois Tool Works Inc's growth rank of 9 out of 10 suggests that the company's growth trajectory is robust relative to its competitors. Its revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model, with an average annual increase of approximately 10.30%, outperforming about 58.95% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Illinois Tool Works Inc's earnings increased by approximately 14.10% per year on average, outperforming about 52.83% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 6.30%, outperforms about 45.21% of global competitors.
Next Steps for Investors
Combining Illinois Tool Works Inc's solid dividend history, its status as a dividend king, a reasonable payout ratio, strong profitability, and positive growth metrics, the company presents an attractive profile for value investors focused on dividend income. These elements suggest that Illinois Tool Works Inc is positioned to continue its dividend payments and potentially increase them in the future, reflecting a commitment to shareholder returns. Investors looking to diversify their portfolios with high-dividend yield stocks should consider the prospects of Illinois Tool Works Inc and can explore further using the High Dividend Yield Screener available to GuruFocus Premium users.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
