Ituran Location and Control (NASDAQ:ITRN) Has Announced A Dividend Of US$0.14

Ituran Location and Control Ltd.'s (NASDAQ:ITRN) investors are due to receive a payment of US$0.14 per share on 14th of July. This payment means the dividend yield will be 2.4%, which is below the average for the industry.

See our latest analysis for Ituran Location and Control

Ituran Location and Control's Earnings Easily Cover the Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Ituran Location and Control was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 20.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the dividend has gone from US$1.23 to US$0.56. The dividend has shrunk at around 7.6% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend's Growth Prospects Are Limited

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Although it's important to note that Ituran Location and Control'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 Ituran Location and Control's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Ituran Location and Control's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Ituran Location and Control that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.