IDP Education Limited (ASX:IEL) is reducing its dividend from last year's comparable payment to A$0.05 on the 25th of September. Based on this payment, the dividend yield will be 1.8%, which is lower than the average for the industry.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

IDP Education's Payment Could Potentially Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, IDP Education's dividend made up quite a large proportion of earnings but only 39% of free cash flows. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 147.1%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 39% which brings it into quite a comfortable range.ASX:IEL Historic Dividend August 30th 2025

View our latest analysis for IDP Education

IDP Education's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of A$0.055 in 2016 to the most recent total annual payment of A$0.10. This implies that the company grew its distributions at a yearly rate of about 6.9% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, IDP Education's earnings per share has shrunk at approximately 9.4% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On IDP Education's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for IDP Education that investors should take into consideration. Is IDP Education not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

View Comments