IGM Financial Inc. (TSE:IGM) Will Pay A CA$0.5625 Dividend In Four Days

It looks like IGM Financial Inc. (TSE:IGM) is about to go ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase IGM Financial's shares on or after the 28th of June, you won't be eligible to receive the dividend, when it is paid on the 31st of July.

The company's next dividend payment will be CA$0.5625 per share, and in the last 12 months, the company paid a total of CA$2.25 per share. Calculating the last year's worth of payments shows that IGM Financial has a trailing yield of 5.9% on the current share price of CA$38.22. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for IGM Financial

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. IGM Financial paid out 69% of its earnings to investors last year, a normal payout level for most businesses.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. 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 explains why we're not overly excited about IGM Financial's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. IGM Financial's dividend payments are effectively flat on where they were 10 years ago.

The Bottom Line

Has IGM Financial got what it takes to maintain its dividend payments? IGM Financial's earnings are effectively flat over recent years, even as the company pays out more than half of its earnings to shareholders as dividends. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.

Curious what other investors think of IGM Financial? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

If you're in the market for strong dividend payers, we recommend checking 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.

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