April 23, 2024
Finance

Insignia Financial’s (ASX:IFL) Dividend Will Be A$0.093


Insignia Financial Ltd. (ASX:IFL) has announced that it will pay a dividend of A$0.093 per share on the 3rd of April. The dividend yield of 7.3% is still a nice boost to shareholder returns, despite the cut.

Check out our latest analysis for Insignia Financial

Insignia Financial Doesn’t Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn’t matter if the payment isn’t sustainable. Despite not generating a profit, Insignia Financial is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we could see the payout ratio reach 193%, which is on the unsustainable side.

historic-dividendhistoric-dividend

historic-dividend

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from A$0.42 total annually to A$0.186. The dividend has shrunk at around 7.8% a year during that period. Generally, we don’t like to see a dividend that has been declining over time as this can degrade shareholders’ returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

Given that the track record hasn’t been stellar, we really want to see earnings per share growing over time. Earnings per share has been sinking by 14% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Insignia Financial’s Dividend Doesn’t Look Great

In summary, it’s not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company’s earnings aren’t high enough to be making such big distributions, and it isn’t backed up by strong growth or consistency either. Considering all of these factors, we wouldn’t rely on this dividend if we wanted to live on the income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we’ve picked out 1 warning sign for Insignia Financial that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.



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