Stock Analysis
Shareholders of International Game Technology PLC (NYSE:IGT) are scheduled to receive a dividend payout of $0.20 per share on April 9th. This announcement equates to a dividend yield of 3.9%, offering a significant boost to shareholder returns.
Coverage of International Game Technology’s Earnings
It is crucial to assess the sustainability of a high dividend yield over the long term. Prior to this announcement, International Game Technology’s dividend exceeded its profits, but the company’s free cash flows comfortably covered it. Given that cash holds more significance than accounting measures of profit, the fact that the cash flows adequately covered the dividend payment is a positive indication.
Looking ahead, the company’s earnings per share (EPS) is projected to increase by 121.8% in the coming year. Based on recent trends, the estimated payout ratio of 44% falls within a comfortable range, further bolstering the sustainability of the dividend.
Consistency and Growth of International Game Technology’s Dividend
While it is reassuring to note that International Game Technology has been paying a dividend for several years, there has been at least one instance of a dividend reduction. This raises concerns about the consistency of the dividend over a complete economic cycle. The moderate growth in the dividend is counterbalanced by historical cuts to the payments, which raises doubts about relying on a dividend income without consistent company earnings.
In terms of earnings per share, International Game Technology has demonstrated a 37% annual increase over the last five years. However, the company is currently paying out 103% of its earnings as dividends, a level that is on the brink of unsustainability without mitigating circumstances.
Conclusion
In conclusion, while International Game Technology’s consistent dividend payment is a positive sign, there are concerns about the long-term sustainability of the current level of payment. Although the dividend may be dependable in the short term, investors may need to consider alternative options for a more sustainable income investment. Furthermore, market movements indicate a preference for a consistent dividend policy over an unpredictable one.
Investors should consider other factors, such as identified warning signs for International Game Technology, before making investment decisions. It is essential to conduct a comprehensive analysis of the company’s valuation, including fair value estimates, risks, dividends, insider transactions, and financial health.
Feedback and concerns regarding this article can be directed to the editorial team at Simply Wall St via email. It is important to note that this article is based on historical data and analyst forecasts, and does not constitute financial advice.
About NYSE:IGT
International Game Technology PLC operates globally, providing gaming technology products and services. The company has reasonable growth potential, combined with a mediocre balance sheet.
In conclusion, investors should carefully evaluate the sustainability of International Game Technology’s dividend and consider all relevant factors before making investment decisions.
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