What To Know Before Buying IOOF Holdings Ltd (ASX:IFL) For Its Dividend

Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. In the past 10 years IOOF Holdings Ltd (ASX:IFL) has returned an average of 5.00% per year to investors in the form of dividend payouts. Let’s dig deeper into whether IOOF Holdings should have a place in your portfolio. Check out our latest analysis for IOOF Holdings

5 questions I ask before picking a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

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

• Has it paid dividend every year without dramatically reducing payout in the past?

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

• Can it afford to pay the current rate of dividends from its earnings?

• Will it have the ability to keep paying its dividends going forward?

ASX:IFL Historical Dividend Yield Jun 5th 18

Does IOOF Holdings pass our checks?

The current trailing twelve-month payout ratio for IFL is 191.65%, which means that the dividend is not well-covered by its earnings. Going forward, analysts expect IFL’s payout to reduce to 97.20% of its earnings, which leads to a dividend yield of 6.89%. However, EPS should increase to A$0.46, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again. In terms of its peers, IOOF Holdings produces a yield of 6.09%, which is high for Capital Markets stocks.

Next Steps:

Whilst there are few things you may like about IOOF Holdings from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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 key aspects you should look at:

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

2. Valuation: What is IFL 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 IFL 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 pass 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.