IPD Group (ASX:IPG) Is Increasing Its Dividend To A$0.047

The board of IPD Group Limited (ASX:IPG) has announced that it will be paying its dividend of A$0.047 on the 3rd of October, an increased payment from last year's comparable dividend. This takes the dividend yield to 2.0%, which shareholders will be pleased with.

See our latest analysis for IPD Group

IPD Group's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, IPD Group's dividend was only 50% of earnings, however it was paying out 148% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

The next year is set to see EPS grow by 80.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.

IPD Group Is Still Building Its Track Record

It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. IPD Group's earnings per share is up 30% over the past year. Rising earnings will make it easier for the company to keep paying dividends, and possibly even increase them. IPD Group is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future. We do note though, one year is too short a time to be drawing strong conclusions about a company's future prospects.

Our Thoughts On IPD Group's Dividend

Overall, we always like to see the dividend being raised, but we don't think IPD Group will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for IPD Group that you should be aware of before investing. Is IPD Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.