Insurance Australia Group Limited (ASX:IAG): Dividend Is Coming In 2 Days, Should You Buy?
Investors who want to cash in on Insurance Australia Group Limited’s (ASX:IAG) upcoming dividend of AU$0.20 per share have only 2 days left to buy the shares before its ex-dividend date, 21 August 2018, in time for dividends payable on the 27 September 2018. 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 Insurance Australia Group’s most recent financial data to examine its dividend characteristics in more detail.
See our latest analysis for Insurance Australia Group
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Is its annual yield among the top 25% of dividend-paying companies?
Has it paid dividend every year without dramatically reducing payout in the past?
Has dividend per share amount increased over the past?
Does earnings amply cover its dividend payments?
Will it be able to continue to payout at the current rate in the future?
Does Insurance Australia Group pass our checks?
The current trailing twelve-month payout ratio for the stock is 84.84%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect IAG’s payout to remain around the same level at 79.33% of its earnings, which leads to a dividend yield of around 4.57%. Moreover, EPS should increase to A$0.42.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Compared to its peers, Insurance Australia Group has a yield of 4.38%, which is high for Insurance stocks but still below the market’s top dividend payers.
Next Steps:
With this in mind, I definitely rank Insurance Australia Group as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. 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. Below, I’ve compiled three pertinent factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for IAG’s future growth? Take a look at our free research report of analyst consensus for IAG’s outlook.
Valuation: What is IAG 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 IAG 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 editorial-team@simplywallst.com.
