Integrated Research Limited (ASX:IRI) Is About To Go Ex-Dividend, And It Pays A 2.4% Yield
Readers hoping to buy Integrated Research Limited (ASX:IRI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Ex-dividend means that investors that purchase the stock on or after the 27th of February will not receive this dividend, which will be paid on the 21st of April.
Integrated Research's upcoming dividend is AU$0.035 a share, following on from the last 12 months, when the company distributed a total of AU$0.072 per share to shareholders. Looking at the last 12 months of distributions, Integrated Research has a trailing yield of approximately 2.4% on its current stock price of A$3.06. If you buy this business for its dividend, you should have an idea of whether Integrated Research's dividend is reliable and sustainable. As a result, readers should always check whether Integrated Research has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Integrated Research
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Integrated Research paid out more than half (57%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Integrated Research generated enough free cash flow to afford its dividend. Over the past year it paid out 118% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
Integrated Research paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Integrated Research's ability to maintain its dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Integrated Research has grown its earnings rapidly, up 20% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past ten years, Integrated Research has increased its dividend at approximately 3.8% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
Final Takeaway
Has Integrated Research got what it takes to maintain its dividend payments? It's good to see that earnings per share are growing and that the company's payout ratio is within a normal range for most businesses. However we're somewhat concerned that it paid out 118% of its cashflow, which is uncomfortably high. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.
Ever wonder what the future holds for Integrated Research? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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