Tiptree Inc. (NASDAQ:TIPT) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 16th of August in order to receive the dividend, which the company will pay on the 26th of August.
Tiptree's next dividend payment will be US$0.04 per share. Last year, in total, the company distributed US$0.16 to shareholders. Looking at the last 12 months of distributions, Tiptree has a trailing yield of approximately 2.5% on its current stock price of $6.51. If you buy this business for its dividend, you should have an idea of whether Tiptree'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. Last year, Tiptree paid out 96% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business.
Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Tiptree's earnings have been skyrocketing, up 26% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Tiptree's dividend payments per share have declined at 9.9% per year on average over the past 10 years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
To Sum It Up
From a dividend perspective, should investors buy or avoid Tiptree? It's been growing earnings per share at a pleasant rate, although its dividend payout was not well covered by earnings. We think there are likely better opportunities out there.
Want to learn more about Tiptree? Here's a visualisation of its historical rate of revenue and earnings growth.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.