Ituran Location and Control's (NASDAQ:ITRN) Dividend Will Be $0.14
The board of Ituran Location and Control Ltd. (NASDAQ:ITRN) has announced that it will pay a dividend of $0.14 per share on the 4th of January. Including this payment, the dividend yield on the stock will be 2.4%, which is a modest boost for shareholders' returns.
View our latest analysis for Ituran Location and Control
Ituran Location and Control's Earnings Easily Cover The Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Ituran Location and Control was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
The next year is set to see EPS grow by 18.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was $1.23 in 2012, and the most recent fiscal year payment was $0.56. Doing the maths, this is a decline of about 7.6% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
Dividend Growth May Be Hard To Achieve
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Over the past five years, it looks as though Ituran Location and Control's EPS has declined at around 2.3% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. 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 Ituran Location and Control's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Ituran Location and Control's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Ituran Location and Control that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
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