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There's A Lot To Like About Ingles Markets' (NASDAQ:IMKT.A) Upcoming US$0.17 Dividend

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Simply Wall St
·4 min read
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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Ingles Markets, Incorporated (NASDAQ:IMKT.A) is about to trade ex-dividend in the next four days. If you purchase the stock on or after the 7th of April, you won't be eligible to receive this dividend, when it is paid on the 15th of April.

Ingles Markets's next dividend payment will be US$0.17 per share, and in the last 12 months, the company paid a total of US$0.66 per share. Calculating the last year's worth of payments shows that Ingles Markets has a trailing yield of 1.1% on the current share price of $62.33. 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 investigate whether Ingles Markets can afford its dividend, and if the dividend could grow.

View our latest analysis for Ingles Markets

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. Ingles Markets is paying out just 6.2% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Ingles Markets generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 4.9% of its cash flow last year.

It's positive to see that Ingles Markets's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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

historic-dividend
historic-dividend

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. That's why it's comforting to see Ingles Markets's earnings have been skyrocketing, up 29% per annum for the past five years. Ingles Markets 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the Ingles Markets dividends are largely the same as they were 10 years ago.

Final Takeaway

Is Ingles Markets worth buying for its dividend? We love that Ingles Markets is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Ingles Markets for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 3 warning signs for Ingles Markets you should be aware of.

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.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.