Intermediate Capital Group's (LON:ICG) Upcoming Dividend Will Be Larger Than Last Year's

The board of Intermediate Capital Group plc (LON:ICG) has announced that it will be paying its dividend of £0.567 on the 1st of August, an increased payment from last year's comparable dividend. This will take the annual payment to 4.2% of the stock price, which is above what most companies in the industry pay.

We've discovered 1 warning sign about Intermediate Capital Group. View them for free.

Intermediate Capital Group's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment was quite easily covered by earnings, but it made up 184% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to rise by 16.3% 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.

See our latest analysis for Intermediate Capital Group

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of £0.276 in 2015 to the most recent total annual payment of £0.83. This means that it has been growing its distributions at 12% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Intermediate Capital Group has grown earnings per share at 33% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Intermediate Capital Group could prove to be a strong dividend payer.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Intermediate Capital Group will make a great income stock. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Intermediate Capital Group 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.