Industria de Diseño Textil SA (BME:ITX) has pleased shareholders over the past 10 years, by paying out dividends. The company is currently worth €75.8b, and now yields roughly 3.0%. Let’s dig deeper into whether Industria de Diseño Textil should have a place in your portfolio.
5 questions to ask before buying a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will the company be able to keep paying dividend based on the future earnings growth?
Does Industria de Diseño Textil pass our checks?
The company currently pays out 49% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect ITX’s payout to increase to 71% of its earnings, which leads to a dividend yield of 3.6%. Furthermore, EPS should increase to €1.18. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. ITX has increased its DPS from €0.21 to €0.75 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
In terms of its peers, Industria de Diseño Textil produces a yield of 3.0%, which is high for Specialty Retail stocks but still below the market’s top dividend payers.
Considering the dividend attributes we analyzed above, Industria de Diseño Textil is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three pertinent factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for ITX’s future growth? Take a look at our free research report of analyst consensus for ITX’s outlook.
- Valuation: What is ITX worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether ITX is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.