Assessing the Sustainability of IHG's Upcoming Dividend
InterContinental Hotels Group PLC (IHG, Financial) recently announced a dividend of $1.04 per share, payable on 2024-05-14, with the ex-dividend date set for 2024-04-04. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into InterContinental Hotels Group PLC's dividend performance and assess its sustainability.
What Does InterContinental Hotels Group PLC Do?
InterContinental Hotels Group operates 946,000 rooms across 19 brands addressing the midscale through luxury segments, as of Dec. 31, 2023. Holiday Inn and Holiday Inn Express constitute the largest brand, while Hotel Indigo, Even, Hualuxe, Kimpton, and Voco are newer lifestyle brands experiencing strong demand. The company launched a midscale brand, Avid, in 2017 and closed on a 51% stake in Regent Hotels in 2018. It acquired Six Senses in 2019 and launched another midscale brand, Garner, in 2023. Managed and franchised represent 99% of total rooms. As of Dec. 31, 2023, the Americas represented 55% of total rooms, with Greater China accounting for 19% and Europe, Asia, the Middle East, and Africa making up 26%.
A Glimpse at InterContinental Hotels Group PLC's Dividend History
InterContinental Hotels Group PLC has maintained a consistent dividend payment record since 2022. Dividends are currently distributed on a bi-annually basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down InterContinental Hotels Group PLC's Dividend Yield and Growth
As of today, InterContinental Hotels Group PLC currently has a 12-month trailing dividend yield of 1.38% and a 12-month forward dividend yield of 1.47%. This suggests an expectation of increase dividend payments over the next 12 months.
InterContinental Hotels Group PLC's dividend yield of 1.38% is near a 10-year low and underperforms than 67.56% of global competitors in the Travel & Leisure industry, suggesting that the company's dividend yield may not be a compelling proposition for income investors.
Based on InterContinental Hotels Group PLC's dividend yield and five-year growth rate, the 5-year yield on cost of InterContinental Hotels Group PLC stock as of today is approximately 1.38%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, InterContinental Hotels Group PLC's dividend payout ratio is 0.32.
InterContinental Hotels Group PLC's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks InterContinental Hotels Group PLC's profitability 8 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported net profit in 9 years out of past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. InterContinental Hotels Group PLC's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and InterContinental Hotels Group PLC's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. InterContinental Hotels Group PLC's revenue has increased by approximately 30.00% per year on average, a rate that outperforms than approximately 82.82% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, InterContinental Hotels Group PLC's earnings increased by approximately 146.60% per year on average, a rate that outperforms than approximately 96.75% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 8.00%, which outperforms than approximately 54.39% of global competitors.
Next Steps
In conclusion, InterContinental Hotels Group PLC's upcoming dividend, backed by a history of consistent payments and a moderate payout ratio, appears sustainable. Though the current yield is low relative to industry peers, the company's strong profitability and impressive growth metrics in revenue, EPS, and EBITDA suggest a solid foundation for future dividend sustainability and potential growth. Investors considering IHG as a dividend stock should weigh these factors in conjunction with their own investment criteria and objectives. For those seeking additional dividend opportunities, GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
