Income Investors Should Know That The Interpublic Group of Companies, Inc. (NYSE:IPG) Goes Ex-Dividend Soon
Readers hoping to buy The Interpublic Group of Companies, Inc. (NYSE:IPG) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, 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. Therefore, if you purchase Interpublic Group of Companies' shares on or after the 5th of June, you won't be eligible to receive the dividend, when it is paid on the 20th of June.
The company's next dividend payment will be US$0.31 per share. Last year, in total, the company distributed US$1.24 to shareholders. Based on the last year's worth of payments, Interpublic Group of Companies stock has a trailing yield of around 3.2% on the current share price of $38.28. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Interpublic Group of Companies has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Interpublic Group of Companies
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Interpublic Group of Companies paid out 51% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year, it paid out more than three-quarters (90%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
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.
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. Fortunately for readers, Interpublic Group of Companies's earnings per share have been growing at 10% a year for the past five years. It paid out more than three-quarters of its earnings in the last year, even though earnings per share are growing rapidly. We're surprised that management has not elected to reinvest more in the business to accelerate growth further.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Interpublic Group of Companies has delivered 18% dividend growth per year on average over the past 10 years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Final Takeaway
Is Interpublic Group of Companies an attractive dividend stock, or better left on the shelf? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Interpublic Group of Companies's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 51% and 90% respectively. In summary, while it has some positive characteristics, we're not inclined to race out and buy Interpublic Group of Companies today.
While it's tempting to invest in Interpublic Group of Companies for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for Interpublic Group of Companies that we recommend you consider before investing in the business.
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.
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