Piper Sandler Companies' (NYSE:PIPR) Dividend Will Be $0.60

The board of Piper Sandler Companies (NYSE:PIPR) has announced that it will pay a dividend on the 8th of December, with investors receiving $0.60 per share. This payment means the dividend yield will be 1.7%, which is below the average for the industry.

See our latest analysis for Piper Sandler Companies

Piper Sandler Companies' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. The last payment was quite easily covered by earnings, but it made up 121% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share could rise by 24.0% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 71%, which is in the range that makes us comfortable with the sustainability of the dividend.

Piper Sandler Companies' Dividend Has Lacked Consistency

Piper Sandler Companies has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2016, the dividend has gone from $1.25 total annually to $2.40. This works out to be a compound annual growth rate (CAGR) of approximately 9.8% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Piper Sandler Companies has been growing its earnings per share at 24% a year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

We should note that Piper Sandler Companies has issued stock equal to 10% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Piper Sandler Companies is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Piper Sandler Companies that investors should know about before committing capital to this stock. Is Piper Sandler Companies 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.