It looks like IG Group Holdings plc (LON:IGG) is about to go ex-dividend in the next three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase IG Group Holdings' shares on or after the 13th of August will not receive the dividend, which will be paid on the 17th of September.
The company's upcoming dividend is UK£0.1446 a share, following on from the last 12 months, when the company distributed a total of UK£0.48 per share to shareholders. Based on the last year's worth of payments, IG Group Holdings has a trailing yield of 3.6% on the current stock price of UK£13.43. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. IG Group Holdings paid out a comfortable 33% of its profit last year.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
See our latest analysis for IG Group Holdings
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at IG Group Holdings, with earnings per share up 10.0% on average over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, IG Group Holdings has lifted its dividend by approximately 5.5% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
From a dividend perspective, should investors buy or avoid IG Group Holdings? 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. Overall, IG Group Holdings looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
On that note, you'll want to research what risks IG Group Holdings is facing. In terms of investment risks, we've identified 1 warning sign with IG Group Holdings and understanding them should be part of your investment process.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.