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 4th of October. Based on this payment, the dividend yield on the company's stock will be 5.6%, which is an attractive boost to shareholder returns.

Check out 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. Information Services Group is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.

Over the next year, EPS is forecast to grow rapidly. Assuming the dividend continues along recent trends, we could see the payout ratio reach 813%, which is on the unsustainable side.

Information Services Group Is Still Building Its Track Record

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 implies that the company grew its distributions at a yearly rate of about 14% over that duration. 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.

The Company Could Face Some Challenges Growing The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Information Services Group has seen EPS rising for the last five years, at 18% per annum. It's not great that the company is not turning a profit, but the decent growth in recent years is certainly a positive sign. All is not lost, but the future of the dividend definitely rests upon the company's ability to become profitable soon.

In Summary

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 company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Information Services Group is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Information Services Group (1 doesn't sit too well with us!) that you should be aware of before investing. 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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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.