Invesco Ltd. (NYSE:IVZ) stock is about to trade ex-dividend in four 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Invesco's shares before the 12th of August in order to be eligible for the dividend, which will be paid on the 1st of September.
The company's next dividend payment will be US$0.17 per share, and in the last 12 months, the company paid a total of US$0.62 per share. Based on the last year's worth of payments, Invesco stock has a trailing yield of around 2.5% on the current share price of $24.8. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Invesco can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Invesco paid out a comfortable 29% of its profit last year.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Invesco's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully 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 has delivered an average of 3.5% per year annual increase in its dividend, based on the past 10 years of dividend payments.
To Sum It Up
From a dividend perspective, should investors buy or avoid Invesco? Invesco's earnings per share have not grown at all in recent years, although we like that it is paying out a low percentage of its earnings. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.
With that being said, if dividends aren't your biggest concern with Invesco, you should know about the other risks facing this business. In terms of investment risks, we've identified 1 warning sign with Invesco and understanding them should be part of your investment process.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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.
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