StepStone Group (NASDAQ:STEP) Is Due To Pay A Dividend Of $0.21

The board of StepStone Group LP (NASDAQ:STEP) has announced that it will pay a dividend on the 15th of December, with investors receiving $0.21 per share. Based on this payment, the dividend yield on the company's stock will be 3.3%, which is an attractive boost to shareholder returns.

View our latest analysis for StepStone Group

StepStone Group Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, StepStone Group's was paying out quite a large proportion of earnings and 81% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

EPS is set to fall by 37.7% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 159%, which could put the dividend under pressure if earnings don't start to improve.

StepStone Group Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. Since 2020, the dividend has gone from $0.28 total annually to $0.84. This means that it has been growing its distributions at 44% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Over the past three years, it looks as though StepStone Group's EPS has declined at around 38% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year 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 StepStone Group's payments, as there could be some issues with sustaining them into the future. While StepStone Group is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for StepStone Group you should be aware of, and 1 of them doesn't sit too well with us. Is StepStone Group not quite the opportunity you were looking for? Why not check out our selection of top 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.