India Tourism Development Corporation Limited (NSE:ITDC) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
India Tourism Development Corporation Limited (NSE:ITDC) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Accordingly, India Tourism Development investors that purchase the stock on or after the 15th of September will not receive the dividend, which will be paid on the 22nd of October.
The company's next dividend payment will be ₹2.95 per share, and in the last 12 months, the company paid a total of ₹2.95 per share. Last year's total dividend payments show that India Tourism Development has a trailing yield of 0.4% on the current share price of ₹664.60. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether India Tourism Development 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. India Tourism Development paid out a comfortable 31% of its profit last year. A useful secondary check can be to evaluate whether India Tourism Development generated enough free cash flow to afford its dividend. Fortunately, it paid out only 41% of its free cash flow in the past year.
It's positive to see that India Tourism Development'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.
See our latest analysis for India Tourism Development
Click here to see how much of its profit India Tourism Development paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see India Tourism Development has grown its earnings rapidly, up 33% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. India Tourism Development has delivered an average of 7.0% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Is India Tourism Development an attractive dividend stock, or better left on the shelf? India Tourism Development has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - India Tourism Development has 2 warning signs we think you should be aware of.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.