Yahoo Finance IPH (ASX:IPH) Is Increasing Its Dividend To A$0.155
IPH Limited (ASX:IPH) will increase its dividend on the 17th of March to A$0.155, which is 6.9% higher than last year's payment from the same period of A$0.145. This takes the annual payment to 3.6% of the current stock price, which is about average for the industry.
Check out our latest analysis for IPH
IPH Is Paying Out More Than It Is Earning
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, the company's dividend was higher than its profits, and made up 78% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.
Earnings per share is forecast to rise by 26.8% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 106%, which is a bit high and could start applying pressure to the balance sheet.
IPH Doesn't Have A Long Payment History
It is great to see that IPH has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The annual payment during the last 8 years was A$0.07 in 2015, and the most recent fiscal year payment was A$0.305. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
Dividend Growth May Be Hard To Achieve
Investors could be attracted to the stock based on the quality of its payment history. Earnings per share has been crawling upwards at 3.7% per year. So the company has struggled to grow its EPS yet it's still paying out 123% of its earnings. This gives limited room for the company to raise the dividend in the future.
The Dividend Could Prove To Be Unreliable
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments are bit high to be considered sustainable, and the track record isn't the best. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 3 warning signs for IPH that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated 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.
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