In This Article:
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 Inchcape plc (LON:INCH) is about to go ex-dividend in just 3 days. The ex-dividend date is commonly two business days 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. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Inchcape's shares on or after the 1st of May, you won't be eligible to receive the dividend, when it is paid on the 16th of June.
The company's next dividend payment will be UK£0.172 per share, and in the last 12 months, the company paid a total of UK£0.28 per share. Based on the last year's worth of payments, Inchcape has a trailing yield of 4.4% on the current stock price of UK£6.50. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Inchcape can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Inchcape's payout ratio is modest, at just 43% of profit. A useful secondary check can be to evaluate whether Inchcape generated enough free cash flow to afford its dividend. Fortunately, it paid out only 29% of its free cash flow in the past year.
It's positive to see that Inchcape's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
View our latest analysis for Inchcape
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. 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 Inchcape's earnings are down 2.4% a year over the past five years.