Information Services (TSE:ISV) Has Announced A Dividend Of CA$0.23

Information Services Corporation (TSE:ISV) has announced that it will pay a dividend of CA$0.23 per share on the 15th of October. This means the annual payment is 3.8% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Information Services

Information Services' Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Information Services' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 22.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 51% 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. The annual payment during the last 10 years was CA$0.80 in 2013, and the most recent fiscal year payment was 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 May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Unfortunately, Information Services' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Information Services' Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Information Services that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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