Tiptree Inc. (NASDAQ:TIPT) stock is about to trade ex-dividend in 3 days time. If you purchase the stock on or after the 20th of March, you won’t be eligible to receive this dividend, when it is paid on the 30th of March.
Tiptree’s next dividend payment will be US$0.04 per share, and in the last 12 months, the company paid a total of US$0.16 per share. Calculating the last year’s worth of payments shows that Tiptree has a trailing yield of 2.7% on the current share price of $5.9. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Tiptree
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. Tiptree paid out a comfortable 31% of its profit last year.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
Click here to see how much of its profit Tiptree paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It’s encouraging to see Tiptree has grown its earnings rapidly, up 30% a year for the past five years.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Tiptree has seen its dividend decline 9.9% per annum on average over the past ten years, which is not great to see. It’s unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We’d hope it’s because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
The Bottom Line
From a dividend perspective, should investors buy or avoid Tiptree? Companies like Tiptree that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly – this can sometimes signal management is focused on the long term future of the business. In summary, Tiptree appears to have some promise as a dividend stock, and we’d suggest taking a closer look at it.
In light of that, while Tiptree has an appealing dividend, it’s worth knowing the risks involved with this stock. Case in point: We’ve spotted 3 warning signs for Tiptree you should be aware of.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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