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The board of Intertek Group plc (LON:ITRK) has announced that it will be paying its dividend of £1.03 on the 20th of June, an increased payment from last year's comparable dividend. This will take the annual payment to 3.1% of the stock price, which is above what most companies in the industry pay.
Intertek Group's Projected Earnings Seem Likely To Cover Future Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Intertek Group's dividend made up quite a large proportion of earnings but only 55% of free cash flows. This leaves plenty of cash for reinvestment into the business.
The next year is set to see EPS grow by 34.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 59%, which is in the range that makes us comfortable with the sustainability of the dividend.
See our latest analysis for Intertek Group
Intertek Group Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the dividend has gone from £0.491 total annually to £1.57. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend's Growth Prospects Are Limited
Investors could be attracted to the stock based on the quality of its payment history. Intertek Group hasn't seen much change in its earnings per share over the last five years. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.
Intertek Group Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 16 analysts we track are forecasting for Intertek Group for free with public analyst estimates for the company. 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.