The board of IntegraFin Holdings plc (LON:IHP) has announced that it will be increasing its dividend on the 21st of January to UK£0.07. Although the dividend is now higher, the yield is only 2.0%, which is below the industry average.

View our latest analysis for IntegraFin Holdings

IntegraFin Holdings' Earnings Easily Cover the Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. IntegraFin Holdings is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 23.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 53%, which is in the range that makes us comfortable with the sustainability of the dividend. historic-dividend

IntegraFin Holdings' Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The first annual payment during the last 3 years was UK£0.064 in 2018, and the most recent fiscal year payment was UK£0.10. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. IntegraFin Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. IntegraFin Holdings has seen EPS rising for the last five years, at 20% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On IntegraFin Holdings' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While IntegraFin Holdings is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for IntegraFin Holdings that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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.