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IMI plc (LON:IMI): 3 Days To Buy Before The Ex-Dividend Date

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Attention dividend hunters! IMI plc (LON:IMI) will be distributing its dividend of UK£0.26 per share on the 17 May 2019, and will start trading ex-dividend in 3 days time on the 04 April 2019. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let's take a look at IMI's most recent financial data to examine its dividend characteristics in more detail.

View our latest analysis for IMI

Here's how I find good dividend stocks

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

  • Is it the top 25% annual dividend yield payer?

  • Does it consistently pay out dividends without missing a payment of significantly cutting payout?

  • Has dividend per share risen in the past couple of years?

  • Does earnings amply cover its dividend payments?

  • Will it have the ability to keep paying its dividends going forward?

LSE:IMI Historical Dividend Yield, March 31st 2019
LSE:IMI Historical Dividend Yield, March 31st 2019

How does IMI fare?

IMI has a trailing twelve-month payout ratio of 65%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 52% which, assuming the share price stays the same, leads to a dividend yield of around 4.5%. Furthermore, EPS is also forecasted to fall to £0.61 in the upcoming year. The lower EPS on top of a lower payout ratio will lead to a fall in dividend payment moving forward.

When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

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 IMI it has increased its DPS from £0.24 to £0.41 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.

Relative to peers, IMI produces a yield of 4.2%, which is high for Machinery stocks but still below the market's top dividend payers.

Next Steps:

With these dividend metrics in mind, I definitely rank IMI 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 key factors you should look at:

  1. Future Outlook: What are well-informed industry analysts predicting for IMI’s future growth? Take a look at our free research report of analyst consensus for IMI’s outlook.

  2. Valuation: What is IMI 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 IMI is currently mispriced by the market.

  3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.