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Here's What We Like About IG Group Holdings' (LON:IGG) Upcoming Dividend
IG Group Holdings plc (LON:IGG) stock is about to trade ex-dividend in three days. Investors can purchase shares before the 28th of January in order to be eligible for this dividend, which will be paid on the 25th of February.
IG Group Holdings's upcoming dividend is UK£0.13 a share, following on from the last 12 months, when the company distributed a total of UK£0.43 per share to shareholders. Based on the last year's worth of payments, IG Group Holdings stock has a trailing yield of around 5.5% on the current share price of £7.87. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for IG Group Holdings
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately IG Group Holdings's payout ratio is modest, at just 46% of profit.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see IG Group Holdings has grown its earnings rapidly, up 21% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, IG Group Holdings has lifted its dividend by approximately 8.9% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Should investors buy IG Group Holdings for the upcoming dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, IG Group Holdings appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
While it's tempting to invest in IG Group Holdings for the dividends alone, you should always be mindful of the risks involved. For example - IG Group Holdings has 2 warning signs we think you should be aware of.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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.
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About LSE:IGG
IG Group Holdings
A fintech company, engages in the online trading business worldwide.
Undervalued established dividend payer.