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

Artisan Partners Asset Management Inc. (NYSE:APAM) will increase its dividend from last year's comparable payment on the 30th of November to $0.65. This will take the dividend yield to an attractive 7.3%, providing a nice boost to shareholder returns.

Check out our latest analysis for Artisan Partners Asset Management

Artisan Partners Asset Management's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Artisan Partners Asset Management's was paying out quite a large proportion of earnings and 81% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

Over the next year, EPS is forecast to expand by 8.1%. If recent patterns in the dividend continues, the payout ratio in 12 months could be 94% which is a bit high but can definitely be sustainable.

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 $2.66. This works out to be a compound annual growth rate (CAGR) of approximately 4.5% a year 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.

Artisan Partners Asset Management Might Find It Hard To Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Artisan Partners Asset Management has seen EPS rising for the last five years, at 11% per annum. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

Our Thoughts On Artisan Partners Asset Management's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Artisan Partners Asset Management's payments are rock solid. Strong earnings growth means Artisan Partners Asset Management has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We don't think Artisan Partners Asset Management is a great stock to add to your portfolio if income is your focus.

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 Artisan Partners Asset Management that investors need to be conscious of moving forward. 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.