There's A Lot To Like About Ingles Markets' (NASDAQ:IMKT.A) Upcoming US$0.17 Dividend

Readers hoping to buy Ingles Markets, Incorporated (NASDAQ:IMKT.A) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 6th of January, you won't be eligible to receive this dividend, when it is paid on the 14th of January.

Ingles Markets's upcoming dividend is US$0.17 a share, following on from the last 12 months, when the company distributed a total of US$0.66 per share to shareholders. Last year's total dividend payments show that Ingles Markets has a trailing yield of 1.5% on the current share price of $42.66. If you buy this business for its dividend, you should have an idea of whether Ingles Markets's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Ingles Markets

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Ingles Markets is paying out just 7.5% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Ingles Markets generated enough free cash flow to afford its dividend. The good news is it paid out just 5.7% of its free cash flow in the last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Ingles Markets paid out over the last 12 months.

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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Ingles Markets has grown its earnings rapidly, up 25% a year for the past five years. Ingles Markets looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Ingles Markets's dividend payments are broadly unchanged compared to where they were 10 years ago.

Final Takeaway

Has Ingles Markets got what it takes to maintain its dividend payments? Ingles Markets has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.

So while Ingles Markets looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 2 warning signs for Ingles Markets that you should be aware of before investing in their shares.

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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