Industria de Diseño Textil (BME:ITX) Is Due To Pay A Dividend Of €0.6804

The board of Industria de Diseño Textil, S.A. (BME:ITX) has announced that it will pay a dividend of €0.6804 per share on the 3rd of November. This will take the annual payment to 3.5% of the stock price, which is above what most companies in the industry pay.

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Industria de Diseño Textil's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Industria de Diseño Textil was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

The next year is set to see EPS grow by 25.5%. If the dividend continues on this path, the payout ratio could be 62% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Industria de Diseño Textil

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was €0.52 in 2015, and the most recent fiscal year payment was €1.68. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Industria de Diseño Textil has impressed us by growing EPS at 10% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Industria de Diseño Textil will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Industria de Diseño Textil has been making. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Industria de Diseño Textil that investors should know about before committing capital to this stock. Is Industria de Diseño Textil not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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