The board of iEnergizer Limited ( LON:IBPO ) has announced that it will pay a dividend on the 30th of July, with investors receiving UK£0.084 per share. Based on this payment, the dividend yield on the company's stock will be 4.7%, which is an attractive boost to shareholder returns.

View our latest analysis for iEnergizer

iEnergizer Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, iEnergizer's dividend made up quite a large proportion of earnings but only 66% of free cash flows. This leaves plenty of cash for reinvestment into the business.

EPS is set to grow by 22.0% over the next year if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could reach 202%, which probably can't continue without starting to put some pressure on the balance sheet.

iEnergizer's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2012, the dividend has gone from US$0.13 to US$0.20. This means that it has been growing its distributions at 5.1% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

iEnergizer Might Find It Hard To Grow Its Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. iEnergizer has seen EPS rising for the last five years, at 22% per annum. However, iEnergizer isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

Our Thoughts On iEnergizer's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think iEnergizer 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. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for iEnergizer that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

This article by Simply Wall St is general in nature. 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.

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