Industria de Diseño Textil's (BME:ITX) Dividend Will Be Increased 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 takes the dividend yield to 3.4%, which shareholders will be pleased with.

Check out our latest analysis for Industria de Diseño Textil

Industria de Diseño Textil's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments 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.

Looking forward, earnings per share is forecast to rise by 36.1% over the next year. If the dividend continues on this path, the payout ratio could be 51% 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. The dividend has gone from an annual total of €0.44 in 2013 to the most recent total annual payment of €1.20. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. 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.

We Could See Industria de Diseño Textil's Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Industria de Diseño Textil has been growing its earnings per share at 6.1% a 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, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Industria de Diseño Textil that investors should take into consideration. 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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