IG Group Holdings plc (LON:IGG) stock is about to trade ex-dividend in 3 days. This means that investors who purchase shares on or after the 28th of January will not receive the dividend, which will be paid on the 25th of February.
IG Group Holdings's next dividend payment will be UK£0.13 per share, on the back of last year when the company paid a total of UK£0.43 to shareholders. Last year's total dividend payments show that IG Group Holdings has a trailing yield of 5.5% on the current share price of £7.87. 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 IG Group Holdings can afford its dividend, and if the dividend could grow.
View our latest analysis for IG Group Holdings
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. That's why it's good to see IG Group Holdings paying out a modest 46% of its earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see IG Group Holdings's earnings have been skyrocketing, up 21% per annum for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. IG Group Holdings has delivered 8.9% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Should investors buy IG Group Holdings for the upcoming dividend? Companies like IG Group Holdings that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, IG Group Holdings looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. In terms of investment risks, we've identified 2 warning signs with IG Group Holdings and understanding them should be part of your investment process.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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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