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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Invesco Ltd. (NYSE:IVZ) is about to go ex-dividend in just four days. You will need to purchase shares before the 12th of February to receive the dividend, which will be paid on the 2nd of March.
Invesco's upcoming dividend is US$0.15 a share, following on from the last 12 months, when the company distributed a total of US$0.62 per share to shareholders. Calculating the last year's worth of payments shows that Invesco has a trailing yield of 2.8% on the current share price of $21.96. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Invesco
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Invesco paid out 54% of its earnings to investors last year, a normal payout level for most businesses.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Invesco's 13% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Invesco has delivered an average of 3.5% per year annual increase in its dividend, based on the past 10 years of dividend payments. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.
Final Takeaway
Is Invesco an attractive dividend stock, or better left on the shelf? We're not overly enthused to see Invesco's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. Invesco doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.