What is the dividend yield on IAG shares in May?

Do IAG shares really offer a 4% dividend yield? Let’s take a look.

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Key points

  • IAG shares are trading with a dividend yield of 4.1%
  • Though, the company's dividends haven't yet recovered to their pre-pandemic levels, but neither has its share price
  • The IAG share price is around 40% lower than it was at the start of 2020 while its dividends have slipped 36% since financial year 2020

The Insurance Australia Group Ltd (ASX: IAG) share price is outperforming in May but the company still boasts a strong dividend yield.

The last 12 months have seen the company stepping up its dividends once more. However, its stock is still trading significantly lower than it was pre-pandemic.

At the time of writing, the IAG share price is up 1.32% on the day at $4.62. That’s around 2% higher than it ended April but around 40% lower than it was at the start of 2020.

For context, the S&P/ASX 200 Index (ASX: XJO) has slipped 5% so far in May and is up around 4% from where it began 2020.

So, with that in mind, let’s take a look at how the company’s dividends compare with its share price in May.

Is IAG really trading with a 4% dividend yield?

Those who own IAG shares for the dividends will likely be stoked to know the company’s dividend yield is 4.16% as of Thursday’s close.

Over the last 12 months, IAG has paid out two dividends worth a combined 19 cents.

The first was its 13-cent final dividend of financial year 2021. The second was its interim dividend, worth 6 cents.

That represents a better annual payout than shareholders received over financial year 2021.

That year, the company skipped its final dividend before offering a 7-cent interim dividend.

Though, investors received a 20-cent final dividend and a 10-cent interim dividend in financial year 2020.

That makes this financial year’s combined payouts a 171% improvement on financial year 2021’s, but a 36% reduction on those of financial year 2020.

It’s also worth noting that IAG’s three most recent dividends haven’t been franked. That means some shareholders haven’t been able to take advantage of the tax benefits often accompanying ASX dividends.

IAG is expected to announce its next dividend – the final dividend of financial year 2022 – on 12 August.

IAG share price snapshot

The IAG share price is outperforming the broader market in 2022. It has gained 3.5% year to date while the ASX 200 has slumped 7%.

However, the insurer’s stock has dumped 6% over the past 12 months. The ASX 200 has gained 0.6% over that period.

Should you invest $1,000 in IAG right now?

Before you consider IAG, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and IAG 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 are better buys.

*Returns as of January 13th 2022

Motley Fool contributor Brooke Cooper 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 has positions in 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 Scott Phillips.

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