ITV (LON:ITV) Will Pay A Dividend Of £0.017

The board of ITV plc (LON:ITV) has announced that it will pay a dividend on the 26th of November, with investors receiving £0.017 per share. Based on this payment, the dividend yield on the company's stock will be 6.3%, which is an attractive boost to shareholder returns.

Check out our latest analysis for ITV

ITV's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite comfortably covered by ITV's earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

EPS is set to fall by 21.5% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 57%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was £0.075, compared to the most recent full-year payment of £0.05. Doing the maths, this is a decline of about 4.0% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Achieve

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. Although it's important to note that ITV's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Our Thoughts On ITV's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments ITV has been making. We don't think ITV is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for ITV you should be aware of, and 1 of them is significant. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.