Polar Capital Holdings (LON:POLR) Is Due To Pay A Dividend Of £0.32

Polar Capital Holdings Plc (LON:POLR) will pay a dividend of £0.32 on the 7th of August. This means the annual payment is 9.6% of the current stock price, which is above the average for the industry.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Polar Capital Holdings' Projections Indicate Future Payments May Be Unsustainable

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 126% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 69%. 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.

Over the next year, EPS is forecast to expand by 33.4%. If the dividend continues on its recent course, the payout ratio in 12 months could be 101%, which is a bit high and could start applying pressure to the balance sheet.

View our latest analysis for Polar Capital Holdings

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 2015, the dividend has gone from £0.25 total annually to £0.46. This works out to be a compound annual growth rate (CAGR) of approximately 6.3% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Polar Capital Holdings has seen earnings per share falling at 3.4% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. 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.

Our Thoughts On Polar Capital Holdings' Dividend

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 is generating plenty of cash, but we still think the dividend is a bit high for comfort. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Polar Capital Holdings 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.

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.