Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Artisan Partners Asset Management Inc. (NYSE:APAM) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Artisan Partners Asset Management's shares on or after the 16th of May, you won't be eligible to receive the dividend, when it is paid on the 31st of May.
The company's next dividend payment will be US$0.61 per share, on the back of last year when the company paid a total of US$2.89 to shareholders. Looking at the last 12 months of distributions, Artisan Partners Asset Management has a trailing yield of approximately 6.6% on its current stock price of US$44.06. If you buy this business for its dividend, you should have an idea of whether Artisan Partners Asset Management's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. It paid out 77% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Artisan Partners Asset Management's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Artisan Partners Asset Management has delivered an average of 5.3% per year annual increase in its dividend, based on the past 10 years of dividend payments.
Final Takeaway
Is Artisan Partners Asset Management an attractive dividend stock, or better left on the shelf? Artisan Partners Asset Management's earnings are effectively flat over recent years, even as the company pays out more than half of its earnings to shareholders as dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.
However if you're still interested in Artisan Partners Asset Management as a potential investment, you should definitely consider some of the risks involved with Artisan Partners Asset Management. To help with this, we've discovered 2 warning signs for Artisan Partners Asset Management that you should be aware of before investing in their shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.