Intermediate Capital Group (LON:ICP) Has Announced A Dividend Of £0.258
The board of Intermediate Capital Group plc (LON:ICP) has announced that it will pay a dividend on the 8th of January, with investors receiving £0.258 per share. This takes the dividend yield to 4.9%, which shareholders will be pleased with.
See our latest analysis for Intermediate Capital Group
Intermediate Capital Group's Payment Has Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last dividend, Intermediate Capital Group is earning enough to cover the payment, but then it makes up 311% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
The next year is set to see EPS grow by 14.5%. If the dividend continues on this path, the payout ratio could be 54% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once 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 £0.78. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Intermediate Capital Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Has Growth Potential
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Intermediate Capital Group has grown earnings per share at 7.5% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.
In Summary
Overall, we always like to see the dividend being raised, but we don't think Intermediate Capital Group will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Intermediate Capital Group (1 doesn't sit too well with us!) that you should be aware of before investing. 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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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.
