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It looks like SEI Investments Company (NASDAQ:SEIC) is about to go ex-dividend in the next three days. Ex-dividend means that investors that purchase the stock on or after the 18th of December will not receive this dividend, which will be paid on the 7th of January.
SEI Investments's next dividend payment will be US$0.37 per share. Last year, in total, the company distributed US$0.70 to shareholders. Based on the last year's worth of payments, SEI Investments stock has a trailing yield of around 1.2% on the current share price of $56.32. If you buy this business for its dividend, you should have an idea of whether SEI Investments's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. SEI Investments is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see SEI Investments earnings per share are up 9.9% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, SEI Investments has increased its dividend at approximately 15% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Has SEI Investments got what it takes to maintain its dividend payments? SEI Investments has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, SEI Investments looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
In light of that, while SEI Investments has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for SEI Investments that we recommend you consider before investing in the business.
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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