Be Sure To Check Out Federated Hermes, Inc. (NYSE:FHI) Before It Goes Ex-Dividend

Federated Hermes, Inc. (NYSE:FHI) stock is about to trade ex-dividend in 3 days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Federated Hermes investors that purchase the stock on or after the 7th of November will not receive the dividend, which will be paid on the 14th of November.

The company's upcoming dividend is US$0.34 a share, following on from the last 12 months, when the company distributed a total of US$1.36 per share to shareholders. Looking at the last 12 months of distributions, Federated Hermes has a trailing yield of approximately 2.8% on its current stock price of US$48.48. If you buy this business for its dividend, you should have an idea of whether Federated Hermes's dividend is reliable and sustainable. So we need to investigate whether Federated Hermes can afford its dividend, and if the dividend could grow.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Federated Hermes's payout ratio is modest, at just 27% of profit.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

View our latest analysis for Federated Hermes

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Federated Hermes's earnings per share have risen 13% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Federated Hermes has lifted its dividend by approximately 3.1% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Federated Hermes is keeping back more of its profits to grow the business.

To Sum It Up

Is Federated Hermes an attractive dividend stock, or better left on the shelf? Companies like Federated Hermes that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, Federated Hermes looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

Wondering what the future holds for Federated Hermes? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.