IVE Group (ASX:IGL) Is Due To Pay A Dividend Of A$0.085

IVE Group Limited (ASX:IGL) has announced that it will pay a dividend of A$0.085 per share on the 16th of October. The dividend yield will be 8.4% based on this payment which is still above the industry average.

View our latest analysis for IVE Group

IVE Group's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, IVE Group's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Over the next year, EPS is forecast to expand by 89.6%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 55% which brings it into quite a comfortable range.

IVE Group's Dividend Has Lacked Consistency

It's comforting to see that IVE Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of A$0.086 in 2016 to the most recent total annual payment of A$0.18. This implies that the company grew its distributions at a yearly rate of about 9.7% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

IVE Group May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, IVE Group's earnings per share has shrunk at approximately 4.3% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think IVE Group is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for IVE Group that investors should know about before committing capital to this stock. Is IVE Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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