Readers hoping to buy IG Group Holdings plc (LON:IGG) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 24th of September, you won't be eligible to receive this dividend, when it is paid on the 22nd of October.
IG Group Holdings's next dividend payment will be UK£0.30 per share, on the back of last year when the company paid a total of UK£0.43 to shareholders. Based on the last year's worth of payments, IG Group Holdings has a trailing yield of 5.0% on the current stock price of £8.625. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether IG Group Holdings can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. IG Group Holdings is paying out an acceptable 66% of its profit, a common payout level among most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see IG Group Holdings's earnings per share have risen 13% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. IG Group Holdings has delivered an average of 8.9% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Is IG Group Holdings an attractive dividend stock, or better left on the shelf? Earnings per share are growing nicely, and IG Group Holdings is paying out a percentage of its earnings that is around the average for dividend-paying stocks. We think this is a pretty attractive combination, and would be interested in investigating IG Group Holdings more closely.
While it's tempting to invest in IG Group Holdings for the dividends alone, you should always be mindful of the risks involved. For example, IG Group Holdings has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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