Imperial Pacific Limited (ASX:IPC) is about to trade ex-dividend in the next 2 days. This means that investors who purchase shares on or after the 1st of October will not receive the dividend, which will be paid on the 12th of October.
Imperial Pacific's next dividend payment will be AU$0.063 per share, and in the last 12 months, the company paid a total of AU$0.063 per share. Looking at the last 12 months of distributions, Imperial Pacific has a trailing yield of approximately 6.0% on its current stock price of A$1.035. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Imperial Pacific's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Imperial Pacific was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Imperial Pacific has delivered an average of 6.0% per year annual increase in its dividend, based on the past 10 years of dividend payments.
We update our analysis on Imperial Pacific every 24 hours, so you can always get the latest insights on its financial health, here.
Is Imperial Pacific worth buying for its dividend? It's hard to get past the idea of Imperial Pacific paying a dividend despite reporting a loss over the past year - especially when the general trend in its earnings also looks to be negative. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
With that being said, if you're still considering Imperial Pacific as an investment, you'll find it beneficial to know what risks this stock is facing. Be aware that Imperial Pacific is showing 4 warning signs in our investment analysis, and 3 of those are potentially serious...
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.
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. 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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