It looks like Intact Financial Corporation (TSE:IFC) is about to go ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 13th of September will not receive this dividend, which will be paid on the 30th of September.
Intact Financial's next dividend payment will be CA$0.76 per share. Last year, in total, the company distributed CA$3.04 to shareholders. Based on the last year's worth of payments, Intact Financial stock has a trailing yield of around 2.3% on the current share price of CA$129.67. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Intact Financial paid out 56% of its earnings to investors last year, a normal payout level for most businesses.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Intact Financial's earnings per share have been growing at 11% a year for the past 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 last 10 years, Intact Financial has lifted its dividend by approximately 9.4% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Is Intact Financial worth buying for its dividend? Intact Financial has an acceptable payout ratio and its earnings per share have been improving at a decent rate. In summary, Intact Financial appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Ever wonder what the future holds for Intact Financial? See what the ten analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.