Readers hoping to buy Cowen Inc. (NASDAQ:COWN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 30th of November in order to be eligible for this dividend, which will be paid on the 15th of December.
Cowen's next dividend payment will be US$0.08 per share, on the back of last year when the company paid a total of US$0.32 to shareholders. Last year's total dividend payments show that Cowen has a trailing yield of 1.3% on the current share price of $24.57. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Cowen has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Cowen paid out just 4.6% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Cowen's earnings per share have dropped 5.7% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Unfortunately Cowen has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
The Bottom Line
Should investors buy Cowen for the upcoming dividend? Cowen's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. It doesn't appear an outstanding opportunity, but could be worth a closer look.
If you're not too concerned about Cowen's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For instance, we've identified 5 warning signs for Cowen (2 make us uncomfortable) you should be aware of.
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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