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ITV plc's (LON:ITV) investors are due to receive a payment of £0.033 per share on 22nd of May. This makes the dividend yield 6.3%, which will augment investor returns quite nicely.
Check out our latest analysis for ITV
ITV's Future Dividend Projections Appear Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, ITV was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
EPS is set to fall by 29.5% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 63%, which is comfortable for the company to continue in the future.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was £0.078, compared to the most recent full-year payment of £0.05. The dividend has shrunk at around 4.3% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.
Dividend Growth May Be Hard To Achieve
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Unfortunately, ITV's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about ITV's payments, as there could be some issues with sustaining them into the future. 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. Overall, we don't think this company has the makings of a good income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for ITV you should be aware of, and 1 of them is a bit unpleasant. Is ITV not quite the opportunity you were looking for? Why not check out our selection of top 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.