Ituran Location and Control Ltd. (NASDAQ:ITRN) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
Readers hoping to buy Ituran Location and Control Ltd. (NASDAQ:ITRN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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 Ituran Location and Control's shares before the 26th of September in order to receive the dividend, which the company will pay on the 11th of October.
The company's next dividend payment will be US$0.15 per share. Last year, in total, the company distributed US$0.60 to shareholders. Looking at the last 12 months of distributions, Ituran Location and Control has a trailing yield of approximately 2.0% on its current stock price of $29.58. If you buy this business for its dividend, you should have an idea of whether Ituran Location and Control's dividend is reliable and sustainable. 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
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Ituran Location and Control paying out a modest 27% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 26% of its free cash flow in the past year.
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.
Click here to see how much of its profit Ituran Location and Control paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Ituran Location and Control's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Earnings per share growth in recent times has not been a standout. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Ituran Location and Control's dividend payments per share have declined at 3.0% per year on average over the past 10 years, which is uninspiring.
To Sum It Up
Is Ituran Location and Control worth buying for its dividend? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine strong earnings per share growth with a low payout ratio, and Ituran Location and Control is halfway there. Ituran Location and Control looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
So while Ituran Location and Control looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To that end, you should learn about the 2 warning signs we've spotted with Ituran Location and Control (including 1 which makes us a bit uncomfortable).
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.
