What is the current IAG (ASX:IAG) dividend payout ratio?

What's IAG's dividend really worth? We do the sums…

| More on:
Young boy wearing suit and glasses counts his money using a calculator.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Insurance Australia Group Ltd (ASX: IAG) share price hasn't had a fantastic couple of weeks on the ASX boards. IAG shares are currently down around 6% since last Monday (11 October), putting them flat over the past month.

This ASX 200 company has had a rather wild 2021 so far. Its shares are up 6.7% year to date on current pricing, with plenty of volatility thrown in.

At the time of writing, the IAG share price is $5.02, up 0.2% for the day so far.

IAG's miserly performance over the past fortnight or so puts focus on its dividend. As any income investor would know, lower share prices equate to a higher starting dividend yield.

What are IAG's most recent dividends worth today?

So IAG has paid out two dividends over the past 12 months, as is the custom on the ASX 200. These dividends consisted of a March interim dividend of 7 cents per share, unfranked. This is in addition to the final September dividend of 13 cents per share, also unfranked. That comes out at a total of 20 cents per share for FY21, giving today's IAG share price a running yield of 3.98%.

That's a fairly meaty dividend by ASX standards today. It certainly tops what all four of the major ASX banks are currently offering. So what kind of payout ratio does this dividend represent?

The payout ratio is a favourite metric of the dividend investor. It maps out what proportion of a company's earnings per share (EPS) are being paid out as a dividend. As such, it can lend some useful insights into the company's financial health, giving an indication of whether or not a dividend is sustainable. For example, if a company is paying out 110% of its earnings as a dividend, it would be a clear red flag that the dividend can't be maintained at its current level for long.

So how does IAG's most recent payout stack up? After all, FY21's total dividend of 20 cents per share is far higher than FY20's total of 10 cents.

What kind of payout ratio does that give this ASX 200 share?

Luckily, it's fairly easy to work out. In IAG's earnings report for FY2021 that it delivered back in August, the company informed investors it managed to bring in 28.51 cents in diluted cash earnings per share. Since IAG paid out 20 cents of that EPS as dividends, we can determine that IAG's FY21 payout ratio was approximately 70.15%.

In other words, IAG forked out 70.15% of its earnings as dividends and retained the remaining 29.85% within its business. If we use non-diluted cash earnings, the payout ratio is closer to 66%.

Last financial year, IAG delivered 12.12 cents per share in EPS, and forked out 10 cents in dividends, meaning its payout ratio has actually fallen from 82.5% in FY20 to 70.15% in FY21, even though it doubled its dividend.

IAG dividend policy dictates the company will pay out 60-80% of its EPS as dividends, so this latest dividend also meets this criterion.

Given IAG's optimistic guidance for FY22, it could be likely this level of income can be maintained next year as well (but we shall have to wait and see).

At the current IAG share price, this insurance giant has a market capitalisation of $12.39 billion.

Should you invest $1,000 in Charter Hall Long Wale Reit right now?

Before you buy Charter Hall Long Wale Reit shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Charter Hall Long Wale Reit wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Insurance Australia Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Financial Shares

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Earnings Results

Why is the QBE share price racing ahead of the benchmark on Friday?

Investors are bidding up QBE shares today. But why?

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Earnings Results

Macquarie share price leaps higher on rising full-year profits

Macquarie reported its full year FY 2025 results today. Here's why ASX investors are reacting enthusiastically.

Read more »

Woman and man calculating a dividend yield.
Financial Shares

Here's what Macquarie thinks QBE shares are worth after reviewing 18 global insurers

Macquarie has just issued a new note on QBE shares.

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
Financial Shares

Should I buy the dip on Macquarie shares now?

Atop their reliable passive income, Macquarie shares offer growth potential, according to this leading expert.

Read more »

Nervous customer in discussions at a bank.
Financial Shares

Guess which ASX 200 bank stock just crashed 19% on shock news

Investors have been hitting the sell button in a panic this afternoon.

Read more »

Two CEOs shaking hands on a deal.
Financial Shares

This ASX 300 stock is jumping on surprise merger news

This stock could be having a very big makeover.

Read more »

Man smiling at a laptop because of a rising share price.
Financial Shares

How this quality ASX 200 stock is 'ideally placed' for years of growth

A leading expert expects more outperformance from this high-flying ASX 200 stock.

Read more »

Cheerful boyfriend showing mobile phone to girlfriend in dining room. They are spending leisure time together at home and planning their financial future.
Financial Shares

Looking for financial stocks outside the big 4 banks?

With the financial sector down to start the year, could these stocks provide upside?

Read more »