Information Services (TSE:ISV) Is Increasing Its Dividend To CA$0.23

Information Services Corporation's (TSE:ISV) dividend will be increasing to CA$0.23 on 15th of April. This will take the dividend yield to an attractive 3.8%, providing a nice boost to shareholder returns.

View our latest analysis for Information Services

Information Services' Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Information Services was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to fall by 21.4%. If the dividend continues along recent trends, we estimate the payout ratio could be 60%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Information Services Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2013, the dividend has gone from CA$0.80 to CA$0.92. This implies that the company grew its distributions at a yearly rate of about 1.6% over that duration. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Information Services has seen EPS rising for the last five years, at 16% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like Information Services' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 2 warning signs for Information Services you should be aware of, and 1 of them is concerning. 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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