Yahoo Finance Here's Why We're Wary Of Buying Platinum Investment Management's (ASX:PTM) For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Platinum Investment Management Limited (ASX:PTM) is about to trade ex-dividend in the next three days. If you purchase the stock on or after the 2nd of March, you won't be eligible to receive this dividend, when it is paid on the 18th of March.
Platinum Investment Management's next dividend payment will be AU$0.12 per share, on the back of last year when the company paid a total of AU$0.24 to shareholders. Based on the last year's worth of payments, Platinum Investment Management stock has a trailing yield of around 5.2% on the current share price of A$4.63. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Platinum Investment Management
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. Its dividend payout ratio is 80% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that Platinum Investment Management's earnings are down 4.7% a year over the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Platinum Investment Management has lifted its dividend by approximately 0.9% a year on average.
Final Takeaway
Is Platinum Investment Management an attractive dividend stock, or better left on the shelf? We're not overly enthused to see Platinum Investment Management's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. 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.
So if you're still interested in Platinum Investment Management despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Be aware that Platinum Investment Management is showing 4 warning signs in our investment analysis, and 2 of those are concerning...
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
