Investors who want to cash in on Intact Financial Corporation’s (TSE:IFC) upcoming dividend of CA$0.70 per share have only 2 days left to buy the shares before its ex-dividend date, 13 September 2018, in time for dividends payable on the 28 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 Intact Financial’s most recent financial data to examine its dividend characteristics in more detail.
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share risen in the past couple of years?
- Is its earnings sufficient to payout dividend at the current rate?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Intact Financial pass our checks?
The current trailing twelve-month payout ratio for the stock is 58.1%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect IFC’s payout to fall to 40.4% of its earnings, which leads to a dividend yield of 2.9%. However, EPS should increase to CA$6.31, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
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. IFC has increased its DPS from CA$1.24 to CA$2.8 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.
In terms of its peers, Intact Financial produces a yield of 2.7%, which is on the low-side for Insurance stocks.
Considering the dividend attributes we analyzed above, Intact Financial is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three key factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for IFC’s future growth? Take a look at our free research report of analyst consensus for IFC’s outlook.
- Valuation: What is IFC 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 IFC 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 email@example.com.