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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 IGM Financial Inc. (TSE:IGM) is about to go ex-dividend in just three 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Accordingly, IGM Financial investors that purchase the stock on or after the 31st of March will not receive the dividend, which will be paid on the 30th of April.
The company's next dividend payment will be CA$0.5625 per share. Last year, in total, the company distributed CA$2.25 to shareholders. Based on the last year's worth of payments, IGM Financial has a trailing yield of 5.0% on the current stock price of CA$45.00. If you buy this business for its dividend, you should have an idea of whether IGM Financial's dividend is reliable and sustainable. As a result, readers should always check whether IGM Financial has been able to grow its dividends, or if the dividend might be cut.
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. IGM Financial paid out 57% of its earnings to investors last year, a normal payout level for most businesses.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
See our latest analysis for IGM Financial
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see IGM Financial earnings per share are up 4.7% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. IGM Financial's dividend payments are broadly unchanged compared to where they were 10 years ago.
To Sum It Up
From a dividend perspective, should investors buy or avoid IGM Financial? IGM Financial has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.