Yahoo Finance Four Days Left To Buy The Interpublic Group of Companies, Inc. (NYSE:IPG) Before The Ex-Dividend Date
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 The Interpublic Group of Companies, Inc. (NYSE:IPG) is about to go ex-dividend in just 4 days. Ex-dividend means that investors that purchase the stock on or after the 31st of August will not receive this dividend, which will be paid on the 15th of September.
Interpublic Group of Companies's next dividend payment will be US$0.26 per share, on the back of last year when the company paid a total of US$1.02 to shareholders. Last year's total dividend payments show that Interpublic Group of Companies has a trailing yield of 5.6% on the current share price of $18.13. If you buy this business for its dividend, you should have an idea of whether Interpublic Group of Companies's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for Interpublic Group of Companies
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Its dividend payout ratio is 84% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline. A useful secondary check can be to evaluate whether Interpublic Group of Companies generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 49% of the free cash flow it generated, which is a comfortable payout ratio.
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?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Interpublic Group of Companies's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. A high payout ratio of 84% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, Interpublic Group of Companies could be signalling that its future growth prospects are thin.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Interpublic Group of Companies has lifted its dividend by approximately 16% a year on average.
To Sum It Up
Should investors buy Interpublic Group of Companies for the upcoming dividend? It's unfortunate that earnings per share have not grown, and we'd note that Interpublic Group of Companies is paying out lower percentage of its cashflow than its profit, but overall the dividend looks well covered by earnings. In summary, it's hard to get excited about Interpublic Group of Companies from a dividend perspective.
So while Interpublic Group of Companies looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 3 warning signs for Interpublic Group of Companies you should know about.
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. 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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