Industria de Diseño Textil (BME:ITX) Is Increasing Its Dividend To €0.486

Industria de Diseño Textil, S.A. (BME:ITX) will increase its dividend from last year's comparable payment on the 2nd of November to €0.486. This will take the dividend yield to an attractive 3.9%, providing a nice boost to shareholder returns.

Check out our latest analysis for Industria de Diseño Textil

Industria de Diseño Textil's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Industria de Diseño Textil's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 25.4%. If the dividend continues on this path, the payout ratio could be 60% by next year, which we think can be pretty sustainable going forward.

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. Since 2013, the annual payment back then was €0.44, compared to the most recent full-year payment of €1.20. This means that it has been growing its distributions at 11% per annum over that time. Industria de Diseño Textil has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been crawling upwards at 4.2% per year. The company has been growing at a pretty soft 4.2% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Industria de Diseño Textil's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. As an example, we've identified 1 warning sign for Industria de Diseño Textil that you should be aware of before investing. 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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