Westwood Holdings Group (NYSE:WHG) Is Paying Out A Dividend Of $0.15
The board of Westwood Holdings Group, Inc. (NYSE:WHG) has announced that it will pay a dividend of $0.15 per share on the 3rd of January. The dividend yield will be 5.5% based on this payment which is still above the industry average.
See our latest analysis for Westwood Holdings Group
Westwood Holdings Group Doesn't Earn Enough To Cover Its Payments
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 124% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 16%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.
If the company can't turn things around, EPS could fall by 30.5% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 169%, which is definitely a bit high to be sustainable going forward.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of $1.60 in 2013 to the most recent total annual payment of $0.60. This works out to be a decline of approximately 9.3% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth Potential Is Shaky
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Westwood Holdings Group's earnings per share has shrunk at 30% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.
The Dividend Could Prove To Be Unreliable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 4 warning signs for Westwood Holdings Group you should be aware of, and 1 of them doesn't sit too well with us. Looking for more high-yielding dividend ideas? Try our collection of 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.
