Should Income Investors Buy IRESS Limited (ASX:IRE) Before Its Ex-Dividend?

Important news for shareholders and potential investors in IRESS Limited (ASX:IRE): The dividend payment of AU$0.16 per share will be distributed into shareholder on 28 September 2018, and the stock will begin trading ex-dividend at an earlier date, 05 September 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into IRESS’s latest financial data to analyse its dividend attributes.

See our latest analysis for IRESS

5 checks you should do on a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is it paying an annual yield above 75% of dividend payers?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has dividend per share risen in the past couple of years?

• Does earnings amply cover its dividend payments?

• Will it be able to continue to payout at the current rate in the future?

ASX:IRE Historical Dividend Yield September 2nd 18

How does IRESS fare?

IRESS has a trailing twelve-month payout ratio of 120%, meaning the dividend is not sufficiently covered by its earnings. In the near future, analysts are predicting a lower payout ratio of 101%, leading to a dividend yield of 3.7%. However, EPS should increase to A$0.42, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of IRE it has increased its DPS from A$0.28 to A$0.44 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.

Compared to its peers, IRESS generates a yield of 3.3%, which is high for Software stocks but still below the market’s top dividend payers.

Next Steps:

Whilst there are few things you may like about IRESS from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three fundamental aspects you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for IRE’s future growth? Take a look at our free research report of analyst consensus for IRE’s outlook.

2. Valuation: What is IRE worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether IRE is currently mispriced by the market.

3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.