Yahoo Finance Perpetual (ASX:PPT) Is Increasing Its Dividend To AU$0.96
The board of Perpetual Limited (ASX:PPT) has announced that it will be increasing its dividend on the 24th of September to AU$0.96. This takes the dividend yield from 4.6% to 4.6%, which shareholders will be pleased with.
View our latest analysis for Perpetual
Perpetual's Earnings Easily Cover the Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the dividend made up 94% of cash flows, but a higher proportion of net income. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.
Earnings per share is forecast to rise by 48.7% over the next year. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 85%, which is on the higher side, but certainly still feasible.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was AU$2.00 in 2011, and the most recent fiscal year payment was AU$1.80. This works out to be a decline of approximately 1.0% 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.
The Dividend Has Limited Growth Potential
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Perpetual's earnings per share has shrunk at 14% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
Perpetual's Dividend Doesn't Look Sustainable
Overall, we always like to see the dividend being raised, but we don't think Perpetual will make a great income stock. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think Perpetual is a great stock to add to your portfolio if income is your focus.
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. Taking the debate a bit further, we've identified 3 warning signs for Perpetual that investors need to be conscious of moving forward. 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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