Stock Analysis

Is It Worth Considering Ituran Location and Control Ltd. (NASDAQ:ITRN) For Its Upcoming Dividend?

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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Ituran Location and Control Ltd. (NASDAQ:ITRN) is about to go ex-dividend in just four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Ituran Location and Control's shares on or after the 20th of March, you won't be eligible to receive the dividend, when it is paid on the 4th of April.

The company's upcoming dividend is US$0.14 a share, following on from the last 12 months, when the company distributed a total of US$0.56 per share to shareholders. Calculating the last year's worth of payments shows that Ituran Location and Control has a trailing yield of 2.5% on the current share price of $22.8. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Ituran Location and Control

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Ituran Location and Control paid out a comfortable 31% of its profit last year. A useful secondary check can be to evaluate whether Ituran Location and Control generated enough free cash flow to afford its dividend. Over the last year it paid out 62% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Ituran Location and Control's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Ituran Location and Control paid out over the last 12 months.

NasdaqGS:ITRN Historic Dividend March 15th 2023

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. So we're not too excited that Ituran Location and Control's earnings are down 2.6% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Ituran Location and Control has increased its dividend at approximately 1.6% a year on average.

The Bottom Line

Is Ituran Location and Control worth buying for its dividend? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. All things considered, we are not particularly enthused about Ituran Location and Control from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Ituran Location and Control, you should know about the other risks facing this business. Every company has risks, and we've spotted 1 warning sign for Ituran Location and Control you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

What are the risks and opportunities for Ituran Location and Control?

Ituran Location and Control Ltd., together with its subsidiaries, provides location-based telematics services and machine-to-machine telematics products.

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  • Price-To-Earnings ratio (12x) is below the US market (13.9x)

  • Earnings are forecast to grow 15.39% per year


No risks detected for ITRN from our risks checks.

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