Intertek Group's (LON:ITRK) Upcoming Dividend Will Be Larger Than Last Year's

The board of Intertek Group plc (LON:ITRK) has announced that it will be paying its dividend of £1.03 on the 20th of June, an increased payment from last year's comparable dividend. This will take the annual payment to 3.2% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Intertek Group

Intertek Group's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, Intertek Group was paying out 73% of earnings, but a comparatively small 55% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Looking forward, earnings per share is forecast to rise by 35.2% over the next year. If the dividend continues on this path, the payout ratio could be 59% by next year, which we think can be pretty sustainable going forward.

Intertek Group Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the dividend has gone from £0.46 total annually to £1.57. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately, Intertek Group's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Slow growth and a high payout ratio could mean that Intertek Group has maxed out the amount that it has been able to pay to shareholders. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

Intertek Group Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Intertek Group is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 16 analysts we track are forecasting for Intertek Group for free with public analyst estimates for the company. 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.