Sculptor Capital Management, Inc.'s (NYSE:SCU) dividend is being reduced by 96% to $0.01 per share on 28th of November, in comparison to last year's comparable payment of $0.28. However, the dividend yield of 5.8% is still a decent boost to shareholder returns.
Sculptor Capital Management's Distributions May Be Difficult To Sustain
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Despite not generating a profit, Sculptor Capital Management is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.
If the trend of the last few years continues, EPS will grow by 29.1% over the next 12 months. The company seems to be going down the right path, but it will probably take a little bit longer than a year to cross over into profitability. Unless this can be done in short order, the dividend might be difficult to sustain.
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was $4.00 in 2012, and the most recent fiscal year payment was $0.52. The dividend has fallen 87% over that period. A company that decreases its dividend over time generally isn't what we are looking for.
The Company Could Face Some Challenges Growing The Dividend
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. We are encouraged to see that Sculptor Capital Management has grown earnings per share at 29% per year over the past five years. Even though the company is not profitable, it is growing at a solid clip. If the company can turn a profit relatively soon, we can see this becoming a reliable income stock.
Sculptor Capital Management's Dividend Doesn't Look Sustainable
Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. Overall, we don't think this company has the makings of a good 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. For instance, we've picked out 2 warning signs for Sculptor Capital Management that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here