Yahoo Finance IGM Financial's (TSE:IGM) Dividend Will Be CA$0.5625
The board of IGM Financial Inc. (TSE:IGM) has announced that it will pay a dividend on the 31st of July, with investors receiving CA$0.5625 per share. This makes the dividend yield 5.9%, which will augment investor returns quite nicely.
Check out our latest analysis for IGM Financial
IGM Financial's Payment Has Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite comfortably covered by IGM Financial's earnings, but it was a bit tighter on the cash flow front. The business is earning enough to make the dividend feasible, but the cash payout ratio of 75% indicates it is more focused on returning cash to shareholders than growing the business.
Looking forward, earnings per share is forecast to rise by 5.9% over the next year. If the dividend continues on this path, the payout ratio could be 66% by next year, which we think can be pretty sustainable going forward.
IGM Financial Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was CA$2.15 in 2014, and the most recent fiscal year payment was CA$2.25. Dividend payments have grown at less than 1% a year over this period. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
The Dividend's Growth Prospects Are Limited
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. IGM Financial hasn't seen much change in its earnings per share over the last five years. The company has been growing at a pretty soft 0.9% per annum, and is paying out quite a lot of its earnings to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about IGM Financial's payments, as there could be some issues with sustaining them into the future. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think IGM Financial is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 6 analysts we track are forecasting for IGM Financial for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of 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.
