Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Over the past 2 years, IVE Group Limited (ASX:IGL) has returned an average of 6.00% per year to shareholders in terms of dividend yield. Let’s dig deeper into whether IVE Group should have a place in your portfolio. View our latest analysis for IVE Group
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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Does it pay an annual yield higher than 75% of dividend payers?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has dividend per share amount increased over the past?
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Does earnings amply cover its dividend payments?
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Will the company be able to keep paying dividend based on the future earnings growth?
Does IVE Group pass our checks?
The current trailing twelve-month payout ratio for IGL is 123.79%, which means that the dividend is not well-covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 62.55%, leading to a dividend yield of 8.15%. Furthermore, EPS should increase to A$0.22, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Unfortunately, it is really too early to view IVE Group as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Relative to peers, IVE Group produces a yield of 7.31%, which is high for Media stocks.
Next Steps:
Whilst there are few things you may like about IVE Group from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three pertinent factors you should further examine:
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1. Future Outlook: What are well-informed industry analysts predicting for IGL’s future growth? Take a look at our free research report of analyst consensus for IGL’s outlook.
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2. Valuation: What is IGL worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether IGL is currently mispriced by the market.
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3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.