Only Four Days Left To Cash In On Information Services' (TSE:ISV) Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Information Services Corporation (TSE:ISV) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Information Services' shares before the 30th of March in order to receive the dividend, which the company will pay on the 15th of April.
The company's upcoming dividend is CA$0.23 a share, following on from the last 12 months, when the company distributed a total of CA$0.92 per share to shareholders. Based on the last year's worth of payments, Information Services stock has a trailing yield of around 4.1% on the current share price of CA$22.34. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Information Services has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Information Services
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Information Services paid out 53% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Information Services generated enough free cash flow to afford its dividend. It distributed 38% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about Information Services's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Information Services has increased its dividend at approximately 1.4% a year on average.
To Sum It Up
Should investors buy Information Services for the upcoming dividend? Earnings per share have been flat and Information Services's dividend payouts are within reasonable limits; without a sharp decline in earnings we feel that the dividend is likely somewhat sustainable. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
Curious what other investors think of Information Services? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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