Platinum Investment Management (ASX:PTM) Is Paying Out A Dividend Of A$0.07

Platinum Investment Management Limited (ASX:PTM) has announced that it will pay a dividend of A$0.07 per share on the 15th of September. This makes the dividend yield 9.2%, which will augment investor returns quite nicely.

Check out our latest analysis for Platinum Investment Management

Platinum Investment Management Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

EPS is set to fall by 21.3% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 121%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from A$0.22 total annually to A$0.14. This works out to be a decline of approximately 4.4% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Platinum Investment Management's EPS has fallen by approximately 15% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

We're Not Big Fans Of Platinum Investment Management's Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Platinum Investment Management make more consistent payments in the future. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. We don't think that this is a great candidate to be an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Platinum Investment Management that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.