Yahoo Finance IMI (LON:IMI) Has Announced That It Will Be Increasing Its Dividend To £0.091
IMI plc's (LON:IMI) periodic dividend will be increasing on the 15th of September to £0.091, with investors receiving 9.6% more than last year's £0.083. This takes the annual payment to 1.6% of the current stock price, which unfortunately is below what the industry is paying.
View our latest analysis for IMI
IMI's Payment Has Solid Earnings Coverage
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, IMI's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 31.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 21%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from £0.352 total annually to £0.257. Doing the maths, this is a decline of about 3.1% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that IMI has been growing its earnings per share at 12% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
IMI Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for IMI that investors should know about before committing capital to this stock. Is IMI not quite the opportunity you were looking for? Why not check out our selection of top 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.
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