Investors Title Company (NASDAQ:ITIC) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Investors Title Company (NASDAQ:ITIC) is about to trade ex-dividend in the next four days. You can purchase shares before the 22nd of March in order to receive the dividend, which the company will pay on the 30th of March.

Investors Title's next dividend payment will be US$0.44 per share, and in the last 12 months, the company paid a total of US$16.76 per share. Calculating the last year's worth of payments shows that Investors Title has a trailing yield of 9.9% on the current share price of $169.95. If you buy this business for its dividend, you should have an idea of whether Investors Title's dividend is reliable and sustainable. So we need to investigate whether Investors Title can afford its dividend, and if the dividend could grow.

View our latest analysis for Investors Title

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Investors Title has a low and conservative payout ratio of just 8.4% of its income after tax.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit Investors Title paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Investors Title's earnings have been skyrocketing, up 27% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Investors Title has delivered an average of 51% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

From a dividend perspective, should investors buy or avoid Investors Title? Companies like Investors Title that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Investors Title appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

In light of that, while Investors Title has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 1 warning sign with Investors Title and understanding them should be part of your investment process.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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