IDACORP (NYSE:IDA) Has Announced That It Will Be Increasing Its Dividend To $0.83

The board of IDACORP, Inc. (NYSE:IDA) has announced that it will be increasing its dividend by 5.1% on the 30th of November to $0.83, up from last year's comparable payment of $0.79. This makes the dividend yield about the same as the industry average at 3.3%.

Check out our latest analysis for IDACORP

IDACORP's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, IDACORP was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, earnings per share is forecast to rise by 8.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 59%, which is in the range that makes us comfortable with the sustainability of the dividend.

IDACORP Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from $1.52 total annually to $3.16. This implies that the company grew its distributions at a yearly rate of about 7.6% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Earnings per share has been crawling upwards at 3.6% per year. The company has been growing at a pretty soft 3.6% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think IDACORP will make a great income stock. While IDACORP is earning enough to cover the payments, the cash flows are lacking. We don't think IDACORP is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, IDACORP has 2 warning signs (and 1 which can't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.