Polar Capital Holdings (LON:POLR) Has Affirmed Its Dividend Of £0.14

The board of Polar Capital Holdings plc (LON:POLR) has announced that it will pay a dividend of £0.14 per share on the 13th of January. This makes the dividend yield 9.4%, which will augment investor returns quite nicely.

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Polar Capital Holdings Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Polar Capital Holdings' profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, earnings per share is forecast to fall by 35.7% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 188%, which could put the dividend under pressure if earnings don't start to improve.

Polar Capital Holdings Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the annual payment back then was £0.09, compared to the most recent full-year payment of £0.46. This means that it has been growing its distributions at 18% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Polar Capital Holdings Might Find It Hard To Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Polar Capital Holdings has seen EPS rising for the last five years, at 15% per annum. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Polar Capital Holdings' payments, as there could be some issues with sustaining them into the future. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Polar Capital Holdings (of which 1 makes us a bit uncomfortable!) you should know about. 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.