Investors Title (NASDAQ:ITIC) Has Announced That It Will Be Increasing Its Dividend To US$0.46
The board of Investors Title Company (NASDAQ:ITIC) has announced that it will be increasing its dividend on the 30th of June to US$0.46. This takes the dividend yield to 9.6%, which shareholders will be pleased with.
View our latest analysis for Investors Title
Investors Title's Earnings Easily Cover the Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Investors Title was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.
Looking forward, earnings per share could rise by 37.7% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 48%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2011, the dividend has gone from US$0.28 to US$16.84. This works out to be a compound annual growth rate (CAGR) of approximately 51% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see Investors Title has been growing its earnings per share at 38% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
Our Thoughts On Investors Title's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. We would probably look elsewhere for an income investment.
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. As an example, we've identified 1 warning sign for Investors Title that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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.
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