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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that IVE Group Limited (ASX:IGL) is about to go ex-dividend in just four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase IVE Group's shares on or after the 11th of September will not receive the dividend, which will be paid on the 16th of October.
The company's upcoming dividend is AU$0.085 a share, following on from the last 12 months, when the company distributed a total of AU$0.18 per share to shareholders. Based on the last year's worth of payments, IVE Group has a trailing yield of 8.4% on the current stock price of AU$2.14. If you buy this business for its dividend, you should have an idea of whether IVE Group'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.
Check out our latest analysis for IVE Group
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Last year IVE Group paid out 100% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 32% of the free cash flow it generated, which is a comfortable payout ratio.
It's good to see that while IVE Group's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that IVE Group's earnings are down 4.3% a year over the past five years.