Investors looking to capture the forthcoming dividend payment from Inghams Group Limited (ASX:ING) will need to act rapidly, as the company is approaching its ex-dividend date imminently. With March 14th marked as the record date for the dividend entitlement, the pivotal ex-dividend date falls just one day earlier.
Inghams, a prominent name within the poultry sector, has declared a dividend of AU$0.12 per share, drawing the attention of yield-seeking shareholders. This upcoming distribution contributes to a significant total of AU$0.24 per share paid over the last twelve months.
Despite a seemingly lucrative dividend yield of 6.5% based on the current share price of AU$3.68, there’s more to the story than the headline figure suggests. The company’s dividend payout ratio stands at 77% of profit, indicating a strong propensity for returning earnings to shareholders.
Comforting for dividend enthusiasts is the fact that Inghams’ dividend distributions have been well supported by free cash flow. Last year, only 20% of its cash flow went towards shareholder payouts, a sign that the company is not overextending itself financially in its dividend policy.
However, it hasn’t all been smooth sailing. Inghams has seen its earnings plateau, with no significant change over the past five years. This could be a red flag for some, suggesting a lack of growth within the company’s core operations.
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Yet, on a more positive note, Inghams has shown a dedication to incrementally rewarding investors, having provided an average annual increase of 24% in its dividend payments over the past seven years. This trend reflects a commitment to maintaining a healthy and rising dividend income stream.
This juxtaposition of substantial dividend yields and stagnant earnings growth poses a dilemma. While Inghams Group’s payout ratios may suggest that dividends could be maintainable at current levels, the static nature of earnings and the absence of strong growth prospects may give investors a moment of pause.
As the clock ticks down to the ex-dividend date, potential and existing shareholders of Inghams Group Limited must contemplate not just the lure of the immediate dividend but also the long-term sustainability and growth trajectory of the business.
