ITV (LON:ITV) Is Due To Pay 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 7.3%, which is an attractive boost to shareholder returns.
See our latest analysis for ITV
ITV's Earnings Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. 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
The company's dividend history has been marked by instability, with at least one cut 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 means that it has been growing its distributions at 6.8% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
Dividend Growth May Be Hard To Come By
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. 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.
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.
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. For example, we've picked out 3 warning signs for ITV that investors should know about before committing capital to this stock. 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.
