IG Group Holdings plc's (LON:IGG) periodic dividend will be increasing on the 17th of October to ￡0.3264, with investors receiving 2.2% more than last year's ￡0.319. This will take the dividend yield to an attractive 4.8%, providing a nice boost to shareholder returns.

View our latest analysis for IG Group Holdings

IG Group Holdings' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, IG Group Holdings was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 45.9%. If the dividend continues on this path, the payout ratio could be 40% by next year, which we think can be pretty sustainable going forward.

IG Group Holdings Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ￡0.282 in 2014, and the most recent fiscal year payment was ￡0.462. This works out to be a compound annual growth rate (CAGR) of approximately 5.1% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. IG Group Holdings has impressed us by growing EPS at 14% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

IG Group Holdings Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 6 analysts we track are forecasting for IG Group Holdings for free with public analyst estimates for the company. Is IG Group Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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