iEnergizer (LON:IBPO) Is Increasing Its Dividend To $0.1107

iEnergizer Limited's (LON:IBPO) dividend will be increasing from last year's payment of the same period to $0.1107 on 21st of December. This will take the annual payment to 4.2% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for iEnergizer

iEnergizer's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend made up a very large portion of earnings and also represented 85% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

The next year is set to see EPS grow by 23.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 55%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the dividend has gone from $0.126 total annually to $0.236. This implies that the company grew its distributions at a yearly rate of about 6.5% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. iEnergizer might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that iEnergizer has been growing its earnings per share at 38% a year over the past five years. However, iEnergizer isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think iEnergizer will make a great income stock. While iEnergizer is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think iEnergizer is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for iEnergizer (1 is a bit unpleasant!) 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.