In This Article:
Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. In the past 10 years Infomedia Ltd (ASX:IFM) has returned an average of 7.00% per year to investors in the form of dividend payouts. Does Infomedia tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for Infomedia
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Does it pay an annual yield higher than 75% of dividend payers?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has dividend per share amount increased over the past?
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Can it afford to pay the current rate of dividends from its earnings?
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Will it be able to continue to payout at the current rate in the future?
Does Infomedia pass our checks?
The company currently pays out 75.55% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect IFM’s payout to remain around the same level at 73.33% of its earnings, which leads to a dividend yield of around 4.09%. In addition to this, EPS should increase to A$0.04. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Not only have dividend payouts from Infomedia fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves. In terms of its peers, Infomedia produces a yield of 3.24%, which is high for Software stocks but still below the market’s top dividend payers.
Next Steps:
If Infomedia is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three important aspects you should further examine:
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Future Outlook: What are well-informed industry analysts predicting for IFM’s future growth? Take a look at our free research report of analyst consensus for IFM’s outlook.
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Valuation: What is IFM 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 IFM is currently mispriced by the market.
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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.