Yahoo Finance There's A Lot To Like About International Game Technology's (NYSE:IGT) Upcoming US$0.20 Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that International Game Technology PLC (NYSE:IGT) is about to go ex-dividend in just 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase International Game Technology's shares before the 30th of May to receive the dividend, which will be paid on the 13th of June.
The company's next dividend payment will be US$0.20 per share, and in the last 12 months, the company paid a total of US$0.80 per share. Based on the last year's worth of payments, International Game Technology stock has a trailing yield of around 4.1% on the current share price of US$19.67. 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 International Game Technology can afford its dividend, and if the dividend could grow.
Check out our latest analysis for International Game Technology
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. International Game Technology paid out 70% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 25% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that International Game Technology'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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see International Game Technology has grown its earnings rapidly, up 43% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the International Game Technology dividends are largely the same as they were nine years ago.
Final Takeaway
Is International Game Technology an attractive dividend stock, or better left on the shelf? We like International Game Technology's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.
In light of that, while International Game Technology has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that International Game Technology is showing 2 warning signs in our investment analysis, and 1 of those shouldn't be ignored...
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.