Artisan Partners Asset Management's (NYSE:APAM) Shareholders Will Receive A Smaller Dividend Than Last Year

Artisan Partners Asset Management Inc.'s (NYSE:APAM) dividend is being reduced from last year's payment covering the same period to $0.90 on the 28th of February. The yield is still above the industry average at 7.5%.

View our latest analysis for Artisan Partners Asset Management

Artisan Partners Asset Management 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. Prior to this announcement, Artisan Partners Asset Management was paying out 75% of earnings and more than 75% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.

Over the next year, EPS is forecast to fall by 27.2%. If the dividend continues along recent trends, we estimate the payout ratio could reach 134%, which could put the dividend in jeopardy if the company's earnings don't improve.

Artisan Partners Asset Management's Dividend Has Lacked Consistency

Looking back, Artisan Partners Asset Management's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2014, the dividend has gone from $1.72 total annually to $2.82. This implies that the company grew its distributions at a yearly rate of about 5.6% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Artisan Partners Asset Management has grown earnings per share at 32% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Artisan Partners Asset Management hasn't been doing.

Our Thoughts On Artisan Partners Asset Management's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While Artisan Partners Asset Management is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

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. Case in point: We've spotted 2 warning signs for Artisan Partners Asset Management (of which 1 can't be ignored!) you should know about. 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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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.