Information Services Corporation's ( TSE:ISV ) investors are due to receive a payment of CA$0.23 per share on 15th of January. This means the annual payment is 4.6% of the current stock price, which is above the average for the industry.
Check out our latest analysis for Information Services
Information Services' Dividend Is Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Information Services' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
Over the next year, EPS is forecast to expand by 82.0%. If the dividend continues on this path, the payout ratio could be 39% by next year, which we think can be pretty sustainable going forward.
Information Services Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of CA$0.80 in 2013 to the most recent total annual payment of CA$0.92. This implies that the company grew its distributions at a yearly rate of about 1.4% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Information Services' payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for Information Services (1 doesn't sit too well with us!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
About TSX:ISC
Information Services
Provides registry and information management services for public data and records in Canada.
Undervalued established dividend payer.
