Intermediate Capital Group (LON:ICP) Has Announced That It Will Be Increasing Its Dividend To £0.258
The board of Intermediate Capital Group plc (LON:ICP) has announced that it will be paying its dividend of £0.258 on the 8th of January, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 5.1%, providing a nice boost to shareholder returns.
View our latest analysis for Intermediate Capital Group
Intermediate Capital Group's Payment Has Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment was quite easily covered by earnings, but it made up 307% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
The next year is set to see EPS grow by 10.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 56% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was £0.263 in 2013, and the most recent fiscal year payment was £0.775. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
Intermediate Capital Group Could Grow Its Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Intermediate Capital Group has impressed us by growing EPS at 7.5% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.
Our Thoughts On Intermediate Capital Group's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Intermediate Capital Group's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Intermediate Capital Group you should be aware of, and 1 of them is concerning. Is Intermediate Capital Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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