IGO Declares A Dividend of A$0.26

September 03, 2024 09:14 PM AEST | By Team Kalkine Media

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IGO Declares A Dividend of A$0.26 — Image source: Shutterstock

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IGO Limited (ASX:IGO) has announced a dividend of A$0.26 per share, scheduled for payment on September 26. This represents an annual yield of 6.8%, surpassing the industry average.

Despite this announcement, concerns arise regarding the sustainability of the dividend. Historically, IGO's dividend payments have sometimes exceeded its profits, though free cash flows have comfortably covered the dividends. Nevertheless, projections suggest that if the current payout pattern continues, the payout ratio could approach 98%.

The company's dividend history shows volatility, including at least one reduction in the past decade. The annual dividend has grown from A$0.06 in 2014 to A$0.37 recently, reflecting a compound annual growth rate of approximately 20%. However, this growth has been inconsistent, which prompts caution.

Earnings per share (EPS) has declined sharply at 51% annually over the past five years, indicating potential challenges for the business. Although earnings are forecasted to rise in the coming year, stability in dividend payments will remain a concern until a consistent track record of earnings growth is established.

Overall, while the short-term reliability of the dividend is supported by current cash flows, the company's inconsistent dividend history and volatile earnings suggest caution. For those interested in high-yielding dividend opportunities, it is advisable to explore a range of options and consider other factors beyond just dividend payments.

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