Stock Analysis

Intertek Group (LON:ITRK) Is Due To Pay A Dividend Of UK£0.72

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The board of Intertek Group plc (LON:ITRK) has announced that it will pay a dividend of UK£0.72 per share on the 17th of June. This means the dividend yield will be fairly typical at 2.1%.

Check out our latest analysis for Intertek Group

Intertek Group's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Intertek Group's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 11.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 60% by next year, which is in a pretty sustainable range.

LSE:ITRK Historic Dividend March 4th 2022

Intertek Group Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from UK£0.28 in 2012 to the most recent annual payment of UK£1.06. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Intertek Group May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings has been rising at 2.4% per annum over the last five years, which admittedly is a bit slow. Intertek Group is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Intertek Group Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Intertek Group that investors should know about before committing capital to this stock. Is Intertek Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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