Piper Sandler Companies (NYSE:PIPR) Is Increasing Its Dividend To US$0.55

Piper Sandler Companies (NYSE:PIPR) has announced that it will be increasing its dividend on the 10th of September to US$0.55. This makes the dividend yield 2.8%, which is above the industry average.

See our latest analysis for Piper Sandler Companies

Piper Sandler Companies' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Piper Sandler Companies' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to fall by 12.3%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 37%, which is comfortable for the company to continue in the future.

Piper Sandler Companies' Dividend Has Lacked Consistency

Piper Sandler Companies has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2016, the first annual payment was US$1.25, compared to the most recent full-year payment of US$3.13. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see Piper Sandler Companies has been growing its earnings per share at 52% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Piper Sandler Companies' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Piper Sandler Companies that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.

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