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Is It Smart To Buy IF Bancorp, Inc. (NASDAQ:IROQ) Before It Goes Ex-Dividend?

Simply Wall St

IF Bancorp, Inc. (NASDAQ:IROQ) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 19th of March in order to receive the dividend, which the company will pay on the 10th of April.

IF Bancorp's upcoming dividend is US$0.15 a share, following on from the last 12 months, when the company distributed a total of US$0.30 per share to shareholders. Looking at the last 12 months of distributions, IF Bancorp has a trailing yield of approximately 1.7% on its current stock price of $18. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for IF Bancorp

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. IF Bancorp is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit IF Bancorp paid out over the last 12 months.

NasdaqCM:IROQ Historical Dividend Yield, March 14th 2020

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see IF Bancorp earnings per share are up 7.3% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past seven years, IF Bancorp has increased its dividend at approximately 17% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Is IF Bancorp worth buying for its dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, IF Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

In light of that, while IF Bancorp has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 2 warning signs for IF Bancorp that we strongly recommend you have a look at before investing in the company.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.