IntegraFin Holdings' (LON:IHP) Upcoming Dividend Will Be Larger Than Last Year's

The board of IntegraFin Holdings plc (LON:IHP) has announced that it will be increasing its dividend by 11% on the 30th of January to £0.08, up from last year's comparable payment of £0.072. The payment will take the dividend yield to 3.2%, which is in line with the average for the industry.

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IntegraFin Holdings' Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. The last payment made up 73% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS is forecast to expand by 65.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 46%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for IntegraFin Holdings

IntegraFin Holdings' Dividend Has Lacked Consistency

It's comforting to see that IntegraFin Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 7 years was £0.064 in 2018, and the most recent fiscal year payment was £0.113. This works out to be a compound annual growth rate (CAGR) of approximately 8.5% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, IntegraFin Holdings has only grown its earnings per share at 2.4% per annum over the past five years. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. For instance, we've picked out 1 warning sign for IntegraFin Holdings that investors should take into consideration. Is IntegraFin Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.