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

Artisan Partners Asset Management Inc.'s (NYSE:APAM) dividend will be increasing from last year's payment of the same period to $0.88 on 28th of November. This makes the dividend yield 8.3%, which is above the industry average.

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Artisan Partners Asset Management's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Artisan Partners Asset Management's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 103% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

EPS is set to grow by 33.6% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 81% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Check out our latest analysis for Artisan Partners Asset Management

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was $3.35 in 2015, and the most recent fiscal year payment was $3.63. Dividend payments have been growing, but very slowly over the period. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings have grown at around 2.8% a year for the past five years, which isn't massive but still better than seeing them shrink. Artisan Partners Asset Management's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

Artisan Partners Asset Management's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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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