Why You Might Be Interested In Intertape Polymer Group Inc. (TSE:ITP) For Its Upcoming Dividend

It looks like Intertape Polymer Group Inc. (TSE:ITP) is about to go ex-dividend in the next three days. You will need to purchase shares before the 19th of March to receive the dividend, which will be paid on the 31st of March.

Intertape Polymer Group's next dividend payment will be US$0.16 per share, on the back of last year when the company paid a total of US$0.63 to shareholders. Calculating the last year's worth of payments shows that Intertape Polymer Group has a trailing yield of 2.7% on the current share price of CA$28.8. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Intertape Polymer Group has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Intertape Polymer Group

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Intertape Polymer Group's payout ratio is modest, at just 50% of profit. 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 distributed 27% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Intertape Polymer Group earnings per share are up 5.3% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last nine years, Intertape Polymer Group has lifted its dividend by approximately 16% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Should investors buy Intertape Polymer Group for the upcoming dividend? Earnings per share growth has been growing somewhat, and Intertape Polymer Group is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Intertape Polymer Group is halfway there. Overall we think this is an attractive combination and worthy of further research.

So while Intertape Polymer Group looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that Intertape Polymer Group is showing 3 warning signs in our investment analysis, and 1 of those is significant...

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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