Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see International Gemological Institute Limited (NSE:IGIL) is about to trade ex-dividend in the next 2 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. In other words, investors can purchase International Gemological Institute's shares before the 24th of August in order to be eligible for the dividend, which will be paid on the 17th of September.
The company's next dividend payment will be ₹2.55 per share, and in the last 12 months, the company paid a total of ₹5.00 per share. Based on the last year's worth of payments, International Gemological Institute stock has a trailing yield of around 1.5% on the current share price of ₹335.80. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see International Gemological Institute paying out a modest 30% of its earnings. A useful secondary check can be to evaluate whether International Gemological Institute generated enough free cash flow to afford its dividend. Over the last year it paid out 59% of its free cash flow as dividends, within the usual range for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
View our latest analysis for International Gemological Institute
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. It's encouraging to see International Gemological Institute has grown its earnings rapidly, up 27% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. International Gemological Institute has delivered an average of 43% per year annual increase in its dividend, based on the past two years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
From a dividend perspective, should investors buy or avoid International Gemological Institute? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.
Curious what other investors think of International Gemological Institute? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.