Jupiter Fund Management (LON:JUP) Is Paying Out Less In Dividends Than Last Year

Jupiter Fund Management Plc (LON:JUP) has announced that on 4th of September, it will be paying a dividend of£0.032, which a reduction from last year's comparable dividend. This means the annual payment is 7.8% of the current stock price, which is above the average for the industry.

View our latest analysis for Jupiter Fund Management

Jupiter Fund Management Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Even though Jupiter Fund Management isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Earnings per share is forecast to rise exponentially over the next year. If recent patterns in the dividend continues, we would start to get a bit worried, with the payout ratio possibly reaching 307%.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was £0.098, compared to the most recent full-year payment of £0.069. Doing the maths, this is a decline of about 3.4% per year. 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. Earnings per share has been sinking by 33% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Jupiter Fund Management's Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Jupiter Fund Management is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Jupiter Fund Management that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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