Information Services Group's (NASDAQ:III) Dividend Will Be $0.045

Information Services Group, Inc. (NASDAQ:III) will pay a dividend of $0.045 on the 29th of March. This means the annual payment is 4.3% of the current stock price, which is above the average for the industry.

View our latest analysis for Information Services Group

Information Services Group Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 138% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

The next 12 months is set to see EPS grow by 54.8%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 104%, which probably can't continue without putting some pressure on the balance sheet.

Information Services Group Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. 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. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. However, Information Services Group's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Information Services Group's Dividend Doesn't Look Great

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. We don't think that this is a great candidate to be an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Information Services Group (2 are significant!) 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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