Information Services Group (NASDAQ:III) Has Announced A Dividend Of $0.045

The board of Information Services Group, Inc. (NASDAQ:III) has announced that it will pay a dividend on the 20th of December, with investors receiving $0.045 per share. Based on this payment, the dividend yield on the company's stock will be 5.4%, which is an attractive boost to shareholder returns.

See our latest analysis for Information Services Group

Information Services Group's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Information Services Group's Could Struggle to Maintain Dividend Payments In The Future

Information Services Group's Future Dividends May Potentially Be At Risk

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Information Services Group is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Earnings per share is forecast to rise exponentially over the next year. If recent patterns in the dividend continues, we would start to get a bit worried, with the payout ratio possibly reaching 333%.

Information Services Group Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2021, the annual payment back then was $0.12, compared to the most recent full-year payment of $0.18. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Information Services Group has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

We Could See Information Services Group's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Information Services Group has seen EPS rising for the last five years, at 6.9% per annum. Even though the company isn't making a profit, strong earnings growth could turn that around in the near future. If the company can become profitable soon, continuing on this trajectory would bode well for the future of the dividend.

Our Thoughts On Information Services Group's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Information Services Group's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Information Services Group has 2 warning signs (and 1 which is a bit concerning) we think you should know about. Is Information Services Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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