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Don't Race Out To Buy IVE Group Limited (ASX:IGL) Just Because It's Going Ex-Dividend

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Simply Wall St
·3 min read
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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see IVE Group Limited (ASX:IGL) is about to trade ex-dividend in the next four days. You can purchase shares before the 9th of March in order to receive the dividend, which the company will pay on the 15th of April.

IVE Group's next dividend payment will be AU$0.07 per share, and in the last 12 months, the company paid a total of AU$0.14 per share. Looking at the last 12 months of distributions, IVE Group has a trailing yield of approximately 8.9% on its current stock price of A$1.57. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether IVE Group has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for IVE Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. IVE Group's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If IVE Group didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. IVE Group reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. IVE Group has delivered an average of 10% per year annual increase in its dividend, based on the past five years of dividend payments.

Remember, you can always get a snapshot of IVE Group's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

Should investors buy IVE Group for the upcoming dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

With that being said, if you're still considering IVE Group as an investment, you'll find it beneficial to know what risks this stock is facing. Be aware that IVE Group is showing 3 warning signs in our investment analysis, and 1 of those is significant...

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.