Information Services' (TSE:ISV) Dividend Will Be CA$0.23

The board of Information Services Corporation ( TSE:ISV ) has announced that it will pay a dividend of CA$0.23 per share on the 15th of April. Based on this payment, the dividend yield on the company's stock will be 3.6%, which is an attractive boost to shareholder returns.

View our latest analysis for Information Services

Information Services' Payment Has 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, Information Services' earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Despite the negative free cash flow, it's important to highlight that the company recently signed a 20-year contract with a major customer, securing a revenue-stream for the next 20 years. This indicates that the situation may not be as dire as it appears at first glance, with the long-term prospects bolstered by this agreement.

Looking forward, earnings per share is forecast to rise by 42.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 47% by next year, which is in a pretty sustainable range.

Information Services Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was CA$0.80, compared to the most recent full-year payment of CA$0.92. This implies that the company grew its distributions at a yearly rate of about 1.4% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Information Services Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Information Services has been growing its earnings per share at 5.8% a year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Information Services you should be aware of, and 1 of them is significant. Is Information Services 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.