New Zealand markets closed
  • NZX 50

    12,036.05
    +12.59 (+0.10%)
     
  • NZD/USD

    0.6496
    +0.0003 (+0.05%)
     
  • NZD/EUR

    0.5970
    +0.0015 (+0.26%)
     
  • ALL ORDS

    7,709.50
    +21.50 (+0.28%)
     
  • ASX 200

    7,493.80
    +25.50 (+0.34%)
     
  • OIL

    79.38
    -1.63 (-2.01%)
     
  • GOLD

    1,927.60
    -2.40 (-0.12%)
     
  • NASDAQ

    12,166.60
    +115.12 (+0.96%)
     
  • FTSE

    7,765.15
    +4.04 (+0.05%)
     
  • Dow Jones

    33,978.08
    +28.67 (+0.08%)
     
  • DAX

    15,150.03
    +17.18 (+0.11%)
     
  • Hang Seng

    22,688.90
    +122.12 (+0.54%)
     
  • NIKKEI 225

    27,382.56
    +19.81 (+0.07%)
     
  • NZD/JPY

    84.3200
    -0.0940 (-0.11%)
     

Incitec Pivot Limited (ASX:IPL) Stock Goes Ex-Dividend In Just Four Days

Incitec Pivot Limited (ASX:IPL) is about to trade ex-dividend in the next 4 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. Therefore, if you purchase Incitec Pivot's shares on or after the 5th of December, you won't be eligible to receive the dividend, when it is paid on the 21st of December.

The company's next dividend payment will be AU$0.17 per share. Last year, in total, the company distributed AU$0.34 to shareholders. Last year's total dividend payments show that Incitec Pivot has a trailing yield of 8.4% on the current share price of A$4.06. 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 Incitec Pivot can afford its dividend, and if the dividend could grow.

See our latest analysis for Incitec Pivot

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Incitec Pivot paid out 52% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Dividends consumed 54% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Incitec Pivot'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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Incitec Pivot's earnings have been skyrocketing, up 23% per annum for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Incitec Pivot could have strong prospects for future increases to the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Incitec Pivot has lifted its dividend by approximately 11% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is Incitec Pivot worth buying for its dividend? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. However, we'd also note that Incitec Pivot is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

In light of that, while Incitec Pivot has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that Incitec Pivot is showing 2 warning signs in our investment analysis, and 1 of those doesn't sit too well with us...

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here