Polar Capital Holdings (LON:POLR) Is Due To Pay A Dividend Of £0.14

Polar Capital Holdings Plc's (LON:POLR) investors are due to receive a payment of £0.14 per share on 10th of January. Based on this payment, the dividend yield on the company's stock will be 8.9%, which is an attractive boost to shareholder returns.

View our latest analysis for Polar Capital Holdings

Polar Capital Holdings' Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 106% of what it was earning and 82% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

Earnings per share is forecast to rise by 22.9% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 93% - on the higher side, but we wouldn't necessarily say this is unsustainable.

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. The annual payment during the last 10 years was £0.25 in 2014, and the most recent fiscal year payment was £0.46. This means that it has been growing its distributions at 6.3% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Polar Capital Holdings has seen earnings per share falling at 4.6% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Polar Capital Holdings that investors need to be conscious of moving forward. 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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