Inghams Group (ASX:ING) Dividend Announcement: A Closer Look

March 13, 2025 05:30 PM AEDT | By Team Kalkine Media

Inghams Group (ASX:ING) Dividend Announcement: A Closer Look — Image source: Shutterstock

Assessing Dividend Sustainability

While a strong dividend yield is attractive, evaluating its sustainability is crucial. Previously, Inghams Group's dividend absorbed a substantial part of its earnings, yet only about 25% of its free cash flow. This indicates that the company retains ample cash for business reinvestments. With earnings per share (EPS) expected to grow by 38.4% next year, if the dividend trend persists, a payout ratio of 59% is anticipated, which supports its sustainability.

Inconsistencies in Dividend Payments

Although Inghams Group has paid dividends for several years, investors have experienced cuts, questioning its consistency. Since 2017, the company has increased its annual dividend from A$0.052 to A$0.20, a compound annual growth rate of approximately 18%. Despite this impressive growth, past reductions may cause hesitation in relying on this dividend as a consistent income source.

Future Prospects for Inghams Group

Given prior dividend cuts, assessing earnings growth is vital to foresee future dividend strength. Inghams Group has managed to grow its EPS by 5.7% annually over the last five years. However, given its need for capital to sustain such growth, the anticipated high payout ratio might constrain future growth opportunities.

Though the dividend has seen cuts, these may reflect previous payout heights. Despite historical instability, short-term dividends appear meagerly reliable as current cash flows are sufficient to cover payments. Investors typically prefer companies maintaining consistent dividends rather than irregular ones. While dividends are an essential factor in stock assessment, Inghams Group should also be analyzed based on other financial indicators.

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