Should Income Investors Look At Industria de Diseño Textil, S.A. (BME:ITX) Before Its Ex-Dividend?
Industria de Diseño Textil, S.A. (BME:ITX) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Industria de Diseño Textil's shares before the 29th of October in order to receive the dividend, which the company will pay on the 2nd of November.
The company's next dividend payment will be €0.70875 per share. Last year, in total, the company distributed €1.75 to shareholders. Calculating the last year's worth of payments shows that Industria de Diseño Textil has a trailing yield of 3.1% on the current share price of €56.74. 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! So we need to investigate whether Industria de Diseño Textil can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Industria de Diseño Textil is paying out an acceptable 58% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Industria de Diseño Textil generated enough free cash flow to afford its dividend. Over the last year it paid out 70% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that Industria de Diseño Textil'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.
View our latest analysis for Industria de Diseño Textil
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Industria de Diseño Textil has grown its earnings rapidly, up 42% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Industria de Diseño Textil could have strong prospects for future increases to the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Industria de Diseño Textil has lifted its dividend by approximately 11% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Is Industria de Diseño Textil worth buying for its dividend? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Industria de Diseño Textil's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 58% and 70% respectively. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Industria de Diseño Textil has 1 warning sign we think you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.