Artisan Partners Asset Management (NYSE:APAM) Is Reducing Its Dividend To $0.50

Artisan Partners Asset Management Inc. (NYSE:APAM) is reducing its dividend from last year's comparable payment to $0.50 on the 31st of May. This means the annual payment is 6.1% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Artisan Partners Asset Management

Artisan Partners Asset Management Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Artisan Partners Asset Management was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

The next 12 months is set to see EPS grow by 6.5%. 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.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was $1.72, compared to the most recent full-year payment of $2.00. This means that it has been growing its distributions at 1.5% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Artisan Partners Asset Management has impressed us by growing EPS at 17% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like Artisan Partners Asset Management's Dividend

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Artisan Partners Asset Management has the makings of a solid income stock moving forward. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Artisan Partners Asset Management that investors should take into consideration. Is Artisan Partners Asset Management 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.