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 on the 3rd of November, with investors receiving €0.6804 per share. This will take the annual payment to 3.9% 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

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. 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. The business is earning enough to make the dividend feasible, but the cash payout ratio of 79% indicates it is more focused on returning cash to shareholders than growing the business.

The next year is set to see EPS grow by 24.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 63% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Industria de Diseño Textil

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of €0.52 in 2015 to the most recent total annual payment of €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 19% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

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. While Industria de Diseño Textil is earning enough to cover the dividend, we are generally unimpressed with its future prospects. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Industria de Diseño Textil that investors need to be conscious of moving forward. 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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