Is iA Financial Corporation (TSE:IAG) a Smart Buy Before the Ex-Dividend Date? A Deep Dive into Dividend Sustainability and Growth Potential

Investors eyeing the ex-dividend date for iA Financial Corporation Inc. (TSE:IAG) on August 22, 2025, must weigh not just the immediate yield but the long-term durability of its dividend and earnings trajectory. With a recent 10% dividend hike to $0.99 per share, a payout ratio of 28.46%, and a solvency ratio of 138%, iA appears to be a compelling case for income-focused investors. But is this a fleeting opportunity or a sustainable play? Let's dissect the numbers.

Dividend Sustainability: A Low Payout, High Retention Strategy

iA's dividend payout ratio of 28.46% in 2025 is a critical metric. By retaining 71.54% of its earnings, the company ensures ample capital for reinvestment, debt management, and strategic growth. Historically, the payout ratio has fluctuated between 27% and 39.7% from 2020 to 2024, but the current level is comfortably low. This flexibility allows iA to maintain its dividend even in downturns, a trait that separates resilient companies from volatile ones.

The recent dividend increase to $0.99 per share (payable on September 15, 2025) is not a gamble but a calculated move. With $325 million in organic capital generated year-to-date 2025 and a $1.5 billion capital buffer, iA has the firepower to sustain payouts while funding its acquisition of RF Capital Group Inc. This deal, expected to add $40 billion in assets under administration, is projected to be neutral to core earnings in Year 1 and accretive by $0.15 per share in Year 2. Such disciplined capital deployment reinforces the dividend's longevity.

Earnings Growth: A 27% YoY Surge and Analyst Confidence

iA's Q2 2025 results were nothing short of stellar. Core earnings per share (EPS) jumped 27% year-over-year to $3.49, with a trailing 12-month return on equity (ROE) of 17.0%, aligning with its long-term target. Analysts are bullish: the average EPS estimate for 2025 is $12.85, with 2026 projected at $13.59. This implies 15.14% growth in 2025 and 5.76% in 2026, outpacing the S&P 500's expected 8.99% for 2025.

The company's diversified business model is a key driver. Its Insurance, Canada segment delivered 25% higher core earnings, while Wealth Management saw a 15% increase due to strong segregated fund sales. U.S. Operations surged 64% YoY, fueled by acquisitions like Vericity and Prosperity. These cross-sector gains reduce reliance on any single market, insulating iA from sector-specific shocks.

Future Growth: Strategic Acquisitions and Shareholder Returns

iA's acquisition of RF Capital Group is a masterstroke. By expanding into the high-net-worth segment, the company taps into a growing demand for wealth management services. The deal's accretive potential—adding $0.15 per share in Year 2—is a testament to iA's ability to execute value-creating deals.

Meanwhile, the Normal Course Issuer Bid (NCIB) program, which repurchased 535,400 shares in Q2 2025, further enhances shareholder value. With a book value per share of $76.02 (up 9% in 12 months), iA's shares trade at a discount to intrinsic value, making buybacks a win-win.

The Verdict: A Buy Before the Ex-Dividend Date?

For long-term income investors, iA presents a rare combination of sustainable dividends, robust earnings growth, and strategic reinvestment. The 28.46% payout ratio ensures flexibility, while the 138% solvency ratio and $1.5 billion capital buffer provide a safety net. The recent dividend hike and acquisition of RF Capital signal confidence in future cash flows.

However, timing is key. Buying ahead of the August 22 ex-dividend date locks in the $0.99 per share payout, but investors should also consider the stock's valuation. At a price-to-book ratio of ~1.2x (based on a share price of ~$91.22), iA trades at a modest premium to its book value, reflecting its strong capital position and growth prospects.

Final Take

iA Financial Corporation is a blue-chip dividend play with the financial strength to sustain and grow its payouts. The recent 10% dividend increase, coupled with a disciplined capital strategy and strategic acquisitions, positions it as a long-term income generator. For investors seeking a mix of yield and growth, purchasing shares before the ex-dividend date—while mindful of the stock's valuation—could be a smart move.

Action Plan:
1. Buy before August 22 to secure the $0.99 dividend.
2. Monitor the RF Capital acquisition for integration risks and accretion timelines.
3. Track the NCIB program to assess buyback efficiency and capital deployment.

In a market where many high-yield stocks lack sustainability, iA stands out as a rare gem. The question isn't whether it's a good time to buy—it's whether you can afford to miss it.