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The board of Virtus Investment Partners, Inc. (NASDAQ:VRTS) has announced that it will be increasing its dividend on the 12th of November to US$1.50. Although the dividend is now higher, the yield is only 1.3%, which is below the industry average.
Virtus Investment Partners' Earnings Easily Cover the Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Virtus Investment Partners was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share could rise by 48.5% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 13% by next year, which is in a pretty sustainable range.
Virtus Investment Partners Is Still Building Its Track Record
The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from US$1.80 in 2014 to the most recent annual payment of US$6.00. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Virtus Investment Partners has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Virtus Investment Partners has seen EPS rising for the last five years, at 48% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
We Really Like Virtus Investment Partners' Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Virtus Investment Partners that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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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