P10's (NYSE:PX) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of P10, Inc. (NYSE:PX) has announced that it will be paying its dividend of $0.035 on the 20th of June, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 1.7%.

View our latest analysis for P10

P10 Doesn't Earn Enough To Cover Its Payments

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Even though P10 isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Over the next year, EPS is forecast to grow rapidly. Assuming the dividend continues along recent trends, we could see the payout ratio reach 95%, which is on the unsustainable side.

P10 Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2022, the annual payment back then was $0.12, compared to the most recent full-year payment of $0.14. This means that it has been growing its distributions at 8.0% per annum over that time. P10 has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Over the past five years, it looks as though P10's EPS has declined at around 29% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think P10's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. 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 identified 3 warning signs for P10 (1 shouldn't be ignored!) that you should be aware of before investing. Is P10 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.