Here's Why We're Wary Of Buying Invesco's (NYSE:IVZ) For Its Upcoming Dividend

Invesco Ltd. (NYSE:IVZ) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Invesco's shares on or after the 14th of February will not receive the dividend, which will be paid on the 4th of March.

The company's next dividend payment will be US$0.205 per share. Last year, in total, the company distributed US$0.82 to shareholders. Based on the last year's worth of payments, Invesco stock has a trailing yield of around 4.3% on the current share price of US$18.91. If you buy this business for its dividend, you should have an idea of whether Invesco's dividend is reliable and sustainable. As a result, readers should always check whether Invesco has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Invesco

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Invesco is paying out an acceptable 70% of its profit, a common payout level among most companies.

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.

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

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Invesco's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Invesco's dividend payments per share have declined at 0.9% per year on average over the past 10 years, which is uninspiring.

The Bottom Line

Is Invesco an attractive dividend stock, or better left on the shelf? Invesco's earnings per share have been essentially flat, and the company is paying out more than half of its earnings as dividends to shareholders. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

Wondering what the future holds for Invesco? See what the 11 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for strong dividend payers, we recommend checking 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.