Piper Sandler Companies (NYSE:PIPR) Is Due To Pay A Dividend Of $0.60

The board of Piper Sandler Companies (NYSE:PIPR) has announced that it will pay a dividend of $0.60 per share on the 9th of June. This payment means that the dividend yield will be 2.8%, which is around the industry average.

See our latest analysis for Piper Sandler Companies

Piper Sandler Companies' Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Piper Sandler Companies is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS could expand by 44.7% if recent trends continue. If the dividend continues on this path, the payout ratio could be 63% by next year, which we think can be pretty sustainable going forward.

Piper Sandler Companies' Dividend Has Lacked Consistency

Looking back, Piper Sandler Companies' dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of $1.25 in 2017 to the most recent total annual payment of $3.65. This means that it has been growing its distributions at 20% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Piper Sandler Companies has seen EPS rising for the last five years, at 45% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

An additional note is that the company has been raising capital by issuing stock equal to 53% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Piper Sandler Companies you should be aware of, and 1 of them doesn't sit too well with us. 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.