Is It Worth Considering Ituran Location and Control Ltd. (NASDAQ:ITRN) For Its Upcoming Dividend?
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Ituran Location and Control Ltd. (NASDAQ:ITRN) is about to go ex-dividend in just three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Ituran Location and Control's shares on or after the 19th of March will not receive the dividend, which will be paid on the 3rd of April.
The company's upcoming dividend is US$0.39 a share, following on from the last 12 months, when the company distributed a total of US$0.96 per share to shareholders. Last year's total dividend payments show that Ituran Location and Control has a trailing yield of 5.7% on the current share price of US$27.18. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Ituran Location and Control has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Ituran Location and Control
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Ituran Location and Control paying out a modest 39% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 18% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Ituran Location and Control's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit Ituran Location and Control paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's not ideal to see Ituran Location and Control's earnings per share have been shrinking at 3.4% a year over the previous five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Ituran Location and Control has delivered an average of 6.1% per year annual increase in its dividend, based on the past 10 years of dividend payments.
To Sum It Up
Is Ituran Location and Control an attractive dividend stock, or better left on the shelf? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. In summary, it's hard to get excited about Ituran Location and Control from a dividend perspective.
On that note, you'll want to research what risks Ituran Location and Control is facing. To help with this, we've discovered 1 warning sign for Ituran Location and Control that you should be aware of before investing in their shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.
