ITV (LON:ITV) Has Announced A Dividend Of £0.017
ITV plc (LON:ITV) will pay a dividend of £0.017 on the 28th of November. Based on this payment, the dividend yield on the company's stock will be 6.8%, which is an attractive boost to shareholder returns.
Check out our latest analysis for ITV
ITV's Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before this announcement, ITV was paying out 72% of earnings, but a comparatively small 70% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.
Looking forward, earnings per share is forecast to rise by 37.8% over the next year. 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 works out to be a compound annual growth rate (CAGR) of approximately 6.8% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
Dividend Growth May Be Hard To Come By
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though ITV's EPS has declined at around 8.0% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think ITV is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for ITV that you should be aware of before investing. 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.
