International Personal Finance's (LON:IPF) Shareholders Will Receive A Bigger Dividend Than Last Year
The board of International Personal Finance plc (LON:IPF) has announced that the dividend on 11th of May will be increased to £0.072, which will be 11% higher than last year's payment of £0.065 which covered the same period. This makes the dividend yield about the same as the industry average at 9.0%.
Check out our latest analysis for International Personal Finance
International Personal Finance's Earnings Easily Cover The Distributions
We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, International Personal Finance's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS is forecast to expand by 44.0%. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was £0.0831, compared to the most recent full-year payment of £0.103. This works out to be a compound annual growth rate (CAGR) of approximately 2.2% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
Dividend Growth May Be Hard To Come By
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. In the last five years, International Personal Finance's earnings per share has shrunk at approximately 8.7% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.
Our Thoughts On International Personal Finance's Dividend
Overall, we always like to see the dividend being raised, but we don't think International Personal Finance will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for International Personal Finance (1 is concerning!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
