Don't Buy IVE Group Limited (ASX:IGL) For Its Next Dividend Without Doing These Checks

It looks like IVE Group Limited (ASX:IGL) is about to go ex-dividend in the next 4 days. You can purchase shares before the 9th of March in order to receive the dividend, which the company will pay on the 15th of April.

IVE Group's next dividend payment will be AU$0.07 per share, and in the last 12 months, the company paid a total of AU$0.14 per share. Based on the last year's worth of payments, IVE Group stock has a trailing yield of around 8.9% on the current share price of A$1.57. If you buy this business for its dividend, you should have an idea of whether IVE Group's dividend is reliable and sustainable. So we need to investigate whether IVE Group can afford its dividend, and if the dividend could grow.

See our latest analysis for IVE Group

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. IVE Group reported a loss last year, so it's not great to see that it has continued paying a dividend. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. IVE Group reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past five years, IVE Group has increased its dividend at approximately 10% a year on average.

Get our latest analysis on IVE Group's balance sheet health here.

Final Takeaway

Has IVE Group got what it takes to maintain its dividend payments? It's hard to get used to IVE Group paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with IVE Group. For example, IVE Group has 3 warning signs (and 1 which is concerning) we think you should know about.

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.

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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.
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