Assessing the Upcoming Dividend and Financial Health of ITW
Illinois Tool Works Inc (NYSE:ITW) recently announced a dividend of $1.4 per share, payable on 2024-01-11, with the ex-dividend date set for 2023-12-28. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Illinois Tool Works Inc's dividend performance and assess its sustainability.
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Illinois Tool Works is a diversified global manufacturer that produces specialized industrial equipment, consumables, and related services. The firm operates 87 global divisions through seven distinct operating segments: automotive OEM, construction products, food equipment, specialty products, test/measurement and electronics, polymers and fluids, and welding. About half of its revenue comes from its operations in North America, with the remainder originating from international markets. ITW takes a bottom-up and decentralized approach to portfolio management, with the exception that each segment must apply its 80/20 operating process modeled on the Pareto principle.
Illinois Tool Works Inc's Dividend Analysis
A Glimpse at Illinois Tool Works Inc's Dividend History
Illinois Tool Works Inc has maintained a consistent dividend payment record since 1964. Dividends are currently distributed on a quarterly basis. Illinois Tool Works Inc has increased its dividend each year since 1964. The stock is thus listed as a dividend king, an honor that is given to companies that have increased their dividend each year for at least the past 59 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Illinois Tool Works Inc's Dividend Yield and Growth
As of today, Illinois Tool Works Inc currently has a 12-month trailing dividend yield of 2.04% and a 12-month forward dividend yield of 2.14%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Illinois Tool Works Inc's annual dividend growth rate was 6.90%. Extended to a five-year horizon, this rate increased to 11.40% per year. And over the past decade, Illinois Tool Works Inc's annual dividends per share growth rate stands at an impressive 14.50%.
Based on Illinois Tool Works Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Illinois Tool Works Inc stock as of today is approximately 3.50%.
Illinois Tool Works Inc's Dividend Analysis
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, Illinois Tool Works Inc's dividend payout ratio is 0.52.
Illinois Tool Works Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Illinois Tool Works Inc's profitability 9 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Illinois Tool Works Inc's growth rank of 9 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Illinois Tool Works Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Illinois Tool Works Inc's revenue has increased by approximately 5.80% per year on average, a rate that underperforms approximately 53.12% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Illinois Tool Works Inc's earnings increased by approximately 6.80% per year on average, a rate that underperforms approximately 56.18% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 10.80%, which underperforms approximately 43.54% of global competitors.
Next Steps
Considering Illinois Tool Works Inc's impressive record as a dividend king, the company's consistent dividend growth rate and moderate payout ratio suggest a sustainable dividend policy. The robust profitability rank further supports the notion that Illinois Tool Works Inc is well-positioned to maintain its dividend payments. However, investors should also consider the underperformance in growth metrics relative to competitors, which could impact future dividend sustainability. It is crucial for investors to weigh these factors and monitor the company's performance closely.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
