IGM Financial (TSE:IGM) Has Announced A Dividend Of CA$0.5625

The board of IGM Financial Inc. (TSE:IGM) has announced that it will pay a dividend on the 31st of January, with investors receiving CA$0.5625 per share. Based on this payment, the dividend yield on the company's stock will be 6.4%, which is an attractive boost to shareholder returns.

Check out our latest analysis for IGM Financial

IGM Financial's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. IGM Financial was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Looking forward, earnings per share is forecast to fall by 13.9% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 65%, 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. Since 2013, the annual payment back then was CA$2.15, compared to the most recent full-year payment of CA$2.25. Dividend payments have been growing, but very slowly over the period. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

We Could See IGM Financial's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. IGM Financial has impressed us by growing EPS at 8.7% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Our Thoughts On IGM Financial's Dividend

Overall, a consistent dividend is a good thing, and we think that IGM Financial has the ability to continue this into the future. However, lack of cash flows makes us wary of the potential for cuts in the dividend's future, even though the dividend is generally looking okay. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. As an example, we've identified 1 warning sign for IGM Financial that you should be aware of before investing. Is IGM Financial 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.