The S&P/ASX 200 Index (ASX: XJO) dividend stock IPH Ltd (ASX: IPH) could be an appealing option for income investors and value investors alike.
It's not one of the most well-known names on the ASX, but the company describes itself as a leading intellectual property services group that operates in 26 IP jurisdictions, including Australia, Canada, China, Hong Kong, Singapore, Indonesia, New Zealand, the Philippines and Thailand.
The IPH share price, as shown on the chart below, is down 23% in the last 12 months and 42% from October 2022. It hasn't been this low for more than five years.
Dividend credentials
Dividend growth is not guaranteed, but this business has one of the more impressive consecutive annual dividend growth streaks.
It has grown its payout every year since 2015, when it first started paying dividends. There are not too many ASX 200 shares with growth records stretching back that far.
In FY24, the ASX dividend stock grew its annual dividend per share by 6% to 35 cents per share. At the current IPH share price, that translates into a dividend yield of 6.2%, excluding franking credits. The lower valuation is helping boost the dividend yield.
Pleasingly, the dividend growth is expected to continue in FY25 and beyond.
The broker UBS currently predicts that IPH could pay an annual dividend per share of 36 cents in FY25, which would represent year over year growth of almost 3% and equate to a dividend yield of 6.3%.
UBS is forecasting the dividend per share can increase every year to at least FY29, where the annual payout could be 44 cents. Excluding franking credits, if that FY29 prediction comes true, it would represent a dividend yield of 7.7%.
Is the ASX dividend stock an opportunity?
There's more to an ASX dividend stock than just the potential passive income.
After seeing the FY24 result, broker UBS noted that second-half sales were "better than expected across all geographies", with ANZ and Canada "surprisingly strong".
When the IPH share price was at $6.08, UBS said the stock was attractively priced, with a price-earnings (P/E) ratio of 13. It's even cheaper now.
UBS is attracted to the company's Canadian expansion. Following a few acquisitions that bring compelling potential synergies, it has a market share of around 35% in Canada.
UBS predicts that the ASX dividend stock will generate a net profit of $125 million in FY25. This puts the current IPH share price at close to 12x FY25's estimated earnings. The broker expects IPH to deliver steadily rising profit in the subsequent years to FY29. The forecasts imply that IPH's net profit could increase by 21.7% between FY25 and FY29.
The ASX dividend stock's profit is not expected to shoot the lights out, but the steady profit growth combined with a good dividend could deliver market-beating returns.
UBS has a buy target on IPH shares, with a price target of $8. If the broker is right, that suggests a possible rise of 41% over the next year.
