Here's What We Like About Info-Tech Systems' (SGX:ITS) Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Info-Tech Systems Ltd. (SGX:ITS) is about to trade ex-dividend in the next three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Info-Tech Systems' shares before the 30th of April in order to be eligible for the dividend, which will be paid on the 15th of May.
The company's next dividend payment will be S$0.0195 per share. Last year, in total, the company distributed S$0.039 to shareholders. Calculating the last year's worth of payments shows that Info-Tech Systems has a trailing yield of 3.8% on the current share price of S$1.04. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Info-Tech Systems paid out 60% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Info-Tech Systems generated enough free cash flow to afford its dividend. It distributed 34% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
View our latest analysis for Info-Tech Systems
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Info-Tech Systems's earnings per share have been growing at 13% a year for the past three years. Info-Tech Systems has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.
We'd also point out that Info-Tech Systems issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.
Unfortunately Info-Tech Systems has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
The Bottom Line
Is Info-Tech Systems an attractive dividend stock, or better left on the shelf? Info-Tech Systems's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.
Ever wonder what the future holds for Info-Tech Systems? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
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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.