Is It Smart To Buy Imperial Oil Limited (TSE:IMO) Before It Goes Ex-Dividend?
Imperial Oil Limited (TSE:IMO) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Imperial Oil's shares on or after the 1st of March, you won't be eligible to receive the dividend, when it is paid on the 1st of April.
The company's next dividend payment will be CA$0.60 per share, and in the last 12 months, the company paid a total of CA$2.40 per share. Based on the last year's worth of payments, Imperial Oil stock has a trailing yield of around 2.9% on the current share price of CA$83.24. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Imperial Oil has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Imperial Oil
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Imperial Oil 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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Imperial Oil's earnings have been skyrocketing, up 26% per annum for the past five years. Imperial Oil looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Imperial Oil has delivered an average of 17% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Is Imperial Oil an attractive dividend stock, or better left on the shelf? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Imperial Oil ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Imperial Oil has 1 warning sign we think you should be aware of.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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.
