Intertek Group (LON:ITRK): A Dividend Growth Story to Watch

Intertek Group PLC (LON:ITRK), a global leader in testing, inspection, and certification services, has cemented its reputation as a dividend growth stock with its latest payout announcement. While the market may have initially fixated on a reported figure of £1.03 as a dividend milestone, the reality is far more compelling: the company’s total dividend per share for 2024 will reach £1.565, a 40% increase from the 2023 total of £1.117. This surge underscores Intertek’s robust financial discipline and its commitment to rewarding shareholders.

The Dividend Surge: Breaking Down the Numbers

The 2024 dividend comprises two payments:
- Interim dividend: 53.9p (declared on 2 August 2024), a 43% rise from the 2023 interim of 37.7p.
- Final dividend: 102.6p (declared on 4 March 2025), a 38% increase from the 2023 final dividend of 74p.

Combined, these payments form a total annual dividend of 156.5p, marking a 40.1% year-on-year jump. This growth aligns with Intertek’s long-term strategy of targeting a circa 50% payout ratio, supported by a dividend cover ratio of 2.0—indicating earnings comfortably fund dividends.

Financial Health: The Foundation of Growth

Intertek’s dividend expansion is underpinned by strong operational performance. Over the past decade, the company has delivered a 12% compound annual dividend growth rate (CAGR), reflecting its ability to convert cash flow into shareholder returns. Key metrics include:
- Dividend Yield: 4.1% as of March 2025, calculated using a share price of £46.40. This compares favorably to its 52-week high yield of 6.4% (April 2025), though recent volatility underscores the importance of monitoring price movements.
- Market Cap: £7.4bn, with 160 million shares in issue, reinforcing its position as a mid-cap dividend stalwart.
- Dividend Consistency: Two consecutive years of dividend increases (CADI of 2 years), a testament to management’s reliability.

Why the Dividend Growth is Sustainable

1. Strong Cash Generation: Intertek’s testing and certification services are essential to industries like healthcare, energy, and manufacturing, ensuring stable demand.
2. Payout Discipline: The 50% payout ratio leaves ample room for reinvestment while maintaining dividend growth.
3. Low Debt: A conservative balance sheet, with net debt of just £169m as of 2024, reduces financial risk.

Investment Considerations

• Yield Attractiveness: At 4.1%, the dividend yield offers income investors a competitive return, especially in an environment of rising rates.
• Growth Potential: With a dividend cover of 2.0, further hikes are plausible if earnings continue to outpace payouts.
• Sector Resilience: Testing and certification services are recession-resistant, offering a steady revenue stream.

Risks to Monitor

• Share Price Volatility: The 52-week yield range (2.5%–6.4%) highlights sensitivity to market sentiment.
• Geopolitical Risks: Intertek operates in over 100 countries; geopolitical disruptions could impact margins.
• Competition: While Intertek dominates its niche, smaller competitors may erode pricing power.

Conclusion: A Compelling Income Play

Intertek Group’s 40% dividend increase in 2024 is no fluke. Backed by a decade of consistent growth, a robust balance sheet, and a disciplined payout strategy, the company has positioned itself as a top-tier income stock. With a dividend yield of 4.1%, a 2.0x cover ratio, and a track record of compounding returns, investors can reasonably expect further upside.

For income-focused investors seeking both yield and growth, Intertek offers a compelling case. While risks exist, the company’s structural advantages and financial prudence suggest this dividend story is far from over.

Final Take: Buy for income and growth, with a target price of £50–£55 over the next 12–18 months, assuming stable earnings and continued dividend expansion.

Data as of March 2025. Past performance is not indicative of future results.