There is a lot to be liked about IBERIABANK Corporation (NASDAQ:IBKC) as an income stock. It has paid dividends over the past 10 years. The company is currently worth US$3.7b, and now yields roughly 2.5%. Does IBERIABANK tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is their annual yield among the top 25% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has it increased its dividend per share amount over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it have the ability to keep paying its dividends going forward?
How does IBERIABANK fare?
The company currently pays out 35% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. However, going forward, analysts expect IBKC’s payout to fall to 22% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 2.5%. However, EPS should increase to $6.99, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of IBKC it has increased its DPS from $1.36 to $1.64 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes IBKC a true dividend rockstar.
In terms of its peers, IBERIABANK generates a yield of 2.5%, which is on the low-side for Banks stocks.
With these dividend metrics in mind, I definitely rank IBERIABANK as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three important factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for IBKC’s future growth? Take a look at our free research report of analyst consensus for IBKC’s outlook.
- Valuation: What is IBKC 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 IBKC is currently mispriced by the market.
- Other 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 past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.