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Artisan Partners Asset Management (NYSE:APAM) Is Increasing Its Dividend To US$1.00

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Artisan Partners Asset Management Inc. (NYSE:APAM) has announced that it will be increasing its dividend on the 31st of August to US$1.00. This will take the annual payment from 7.8% to 7.8% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Artisan Partners Asset Management

Artisan Partners Asset Management's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend made up a very large portion of earnings and also represented 82% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.

Looking forward, earnings per share is forecast to rise by 17.0% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 74% which would be quite comfortable going to take the dividend forward.

historic-dividend
historic-dividend

Artisan Partners Asset Management's Dividend Has Lacked Consistency

Artisan Partners Asset Management has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2013, the first annual payment was US$1.72, compared to the most recent full-year payment of US$3.99. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Artisan Partners Asset Management's Dividend Might Lack Growth

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see Artisan Partners Asset Management has been growing its earnings per share at 23% a year over the past five years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Artisan Partners Asset Management is not retaining those earnings to reinvest in growth.

Our Thoughts On Artisan Partners Asset Management's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Artisan Partners Asset Management's payments are rock solid. Strong earnings growth means Artisan Partners Asset Management has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We don't think Artisan Partners Asset Management is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 3 warning signs for Artisan Partners Asset Management that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.