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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 Pzena Investment Management, Inc (NYSE:PZN) is about to go ex-dividend in just three days. This means that investors who purchase shares on or after the 11th of February will not receive the dividend, which will be paid on the 25th of February.
Pzena Investment Management's next dividend payment will be US$0.25 per share, on the back of last year when the company paid a total of US$0.34 to shareholders. Last year's total dividend payments show that Pzena Investment Management has a trailing yield of 3.7% on the current share price of $9.18. If you buy this business for its dividend, you should have an idea of whether Pzena Investment 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. Pzena Investment Management paid out 66% of its earnings to investors last year, a normal payout level for most businesses.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. 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 Pzena Investment Management's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Pzena Investment Management has delivered an average of 11% per year annual increase in its dividend, based on the past 10 years of dividend payments.
To Sum It Up
Has Pzena Investment Management got what it takes to maintain its dividend payments? Earnings per share have not grown at all, and the company pays out a bit over half its profits to shareholders. Pzena Investment Management doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
With that being said, if you're still considering Pzena Investment Management as an investment, you'll find it beneficial to know what risks this stock is facing. Our analysis shows 3 warning signs for Pzena Investment Management that we strongly recommend you have a look at before investing in the company.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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.
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