Four Days Left Until International Consolidated Airlines Group S.A. (LON:IAG) Trades Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that International Consolidated Airlines Group S.A. (LON:IAG) is about to go ex-dividend in just four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase International Consolidated Airlines Group's shares on or after the 5th of September will not receive the dividend, which will be paid on the 9th of September.

The company's next dividend payment will be €0.03 per share. Last year, in total, the company distributed €0.06 to shareholders. Last year's total dividend payments show that International Consolidated Airlines Group has a trailing yield of 2.8% on the current share price of UK£1.83. If you buy this business for its dividend, you should have an idea of whether International Consolidated Airlines Group's dividend is reliable and sustainable. So we need to investigate whether International Consolidated Airlines Group can afford its dividend, and if the dividend could grow.

See our latest analysis for International Consolidated Airlines Group

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. International Consolidated Airlines Group is paying out just 5.6% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. International Consolidated Airlines Group's earnings per share have fallen at approximately 18% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. International Consolidated Airlines Group has seen its dividend decline 13% per annum on average over the past nine years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

Final Takeaway

From a dividend perspective, should investors buy or avoid International Consolidated Airlines Group? International Consolidated Airlines Group's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. We think this is a pretty attractive combination, and would be interested in investigating International Consolidated Airlines Group more closely.

While it's tempting to invest in International Consolidated Airlines Group for the dividends alone, you should always be mindful of the risks involved. We've identified 2 warning signs with International Consolidated Airlines Group (at least 1 which can't be ignored), and understanding these should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.