It Might Not Be A Great Idea To Buy TP ICAP Group PLC (LON:TCAP) For Its Next Dividend
TP ICAP Group PLC (LON:TCAP) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase TP ICAP Group's shares on or after the 13th of April will not receive the dividend, which will be paid on the 23rd of May.
The company's next dividend payment will be UK£0.079 per share, and in the last 12 months, the company paid a total of UK£0.12 per share. Last year's total dividend payments show that TP ICAP Group has a trailing yield of 6.9% on the current share price of £1.805. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for TP ICAP Group
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 TP ICAP Group paid out 94% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings.
Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see TP ICAP Group's earnings per share have been shrinking at 3.5% a year over the previous five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last six years, TP ICAP Group has lifted its dividend by approximately 1.7% a year on average.
Final Takeaway
Is TP ICAP Group worth buying for its dividend? Not only are earnings per share shrinking, but TP ICAP Group is paying out a disconcertingly high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.
Although, if you're still interested in TP ICAP Group and want to know more, you'll find it very useful to know what risks this stock faces. In terms of investment risks, we've identified 3 warning signs with TP ICAP Group and understanding them should be part of your investment process.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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