Yahoo Finance Integrated Research (ASX:IRI) Could Be A Buy For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Integrated Research Limited (ASX:IRI) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. Thus, you can purchase Integrated Research's shares before the 2nd of September in order to receive the dividend, which the company will pay on the 15th of October.
The company's next dividend payment will be AU$0.02 per share, on the back of last year when the company paid a total of AU$0.02 to shareholders. Looking at the last 12 months of distributions, Integrated Research has a trailing yield of approximately 3.7% on its current stock price of AU$0.545. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Integrated Research
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. Integrated Research paid out just 13% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Click here to see how much of its profit Integrated Research paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Integrated Research, with earnings per share up 4.1% on average over the last five years. Growth has been anaemic. Yet with more than 75% of its earnings being kept in the business, there is ample room to reinvest in growth or lift the payout ratio - either of which could increase the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Integrated Research's dividend payments per share have declined at 8.8% per year on average over the past 10 years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
To Sum It Up
Is Integrated Research worth buying for its dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating Integrated Research more closely.
In light of that, while Integrated Research has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 4 warning signs with Integrated Research (at least 2 which are a bit unpleasant), and understanding them should be part of your investment process.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
