Yahoo Finance Why You Might Be Interested In IMCD N.V. (AMS:IMCD) For Its Upcoming 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 IMCD N.V. (AMS:IMCD) is about to go ex-dividend in just 4 days. Typically, the ex-dividend date is one business day 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase IMCD's shares before the 16th of May in order to be eligible for the dividend, which will be paid on the 21st of May.
The company's next dividend payment will be €2.24 per share. Last year, in total, the company distributed €2.24 to shareholders. Calculating the last year's worth of payments shows that IMCD has a trailing yield of 1.5% on the current share price of €147.30. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether IMCD can afford its dividend, and if the dividend could grow.
View our latest analysis for IMCD
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately IMCD's payout ratio is modest, at just 44% of profit. A useful secondary check can be to evaluate whether IMCD generated enough free cash flow to afford its dividend. It distributed 35% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 IMCD has grown its earnings rapidly, up 22% 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.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. IMCD has delivered 31% dividend growth per year on average over the past nine years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Final Takeaway
Has IMCD got what it takes to maintain its dividend payments? We love that IMCD is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. IMCD looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 1 warning sign for IMCD and you should be aware of it before buying any shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
