IGM Financial (TSE:IGM) Has Affirmed Its Dividend Of CA$0.5625

IGM Financial Inc.'s (TSE:IGM) investors are due to receive a payment of CA$0.5625 per share on 30th of April. This means the annual payment is 6.5% of the current stock price, which is above the average for the industry.

View our latest analysis for IGM Financial

IGM Financial'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, IGM Financial was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 78% indicates it is more focused on returning cash to shareholders than growing the business.

Over the next year, EPS is forecast to fall by 14.1%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 68%, which is comfortable for the company to continue in the future.

IGM Financial Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of CA$2.15 in 2014 to the most recent total annual payment of CA$2.25. Dividend payments have been growing, but very slowly over the period. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 4.1% per annum over the last five years, which admittedly is a bit slow. The company has been growing at a pretty soft 4.1% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about IGM Financial's payments, as there could be some issues with sustaining them into the future. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for IGM Financial that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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