International Game Technology (NYSE:IGT) Will Pay A Dividend Of $0.20

The board of International Game Technology PLC (NYSE:IGT) has announced that it will pay a dividend of $0.20 per share on the 10th of December. This means the annual payment is 4.0% of the current stock price, which is above the average for the industry.

View our latest analysis for International Game Technology

International Game Technology's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, International Game Technology's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Looking forward, earnings per share is forecast to rise by 86.3% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 68% which would be quite comfortable going to take the dividend forward.

International Game Technology's Dividend Has Lacked Consistency

It's comforting to see that International Game Technology has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The last annual payment of $0.80 was flat on the annual payment from9 years ago. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

International Game Technology Might Find It Hard To Grow Its Dividend

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. International Game Technology has impressed us by growing EPS at 22% per year over the past five years. Although earnings per share is up nicely International Game Technology is paying out 127% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

Our Thoughts On International Game Technology's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about International Game Technology's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for International Game Technology that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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