Yahoo Finance Interested In Innospec's (NASDAQ:IOSP) Upcoming US$0.59 Dividend? You Have Four Days Left
Innospec Inc. (NASDAQ:IOSP) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Innospec investors that purchase the stock on or after the 15th of November will not receive the dividend, which will be paid on the 24th of November.
The company's upcoming dividend is US$0.59 a share, following on from the last 12 months, when the company distributed a total of US$1.18 per share to shareholders. Based on the last year's worth of payments, Innospec has a trailing yield of 1.2% on the current stock price of $93.63. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Innospec has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Innospec
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 Innospec's payout ratio is modest, at just 29% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out more than half (57%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that Innospec's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Innospec's earnings per share have dropped 5.6% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last eight years, Innospec has lifted its dividend by approximately 11% a year on average.
The Bottom Line
Is Innospec an attractive dividend stock, or better left on the shelf? Earnings per share have fallen significantly, although at least Innospec paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
Ever wonder what the future holds for Innospec? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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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