In This Article:
Readers hoping to buy Polar Capital Holdings Plc (LON:POLR) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Polar Capital Holdings' shares before the 12th of December in order to be eligible for the dividend, which will be paid on the 10th of January.
The company's upcoming dividend is UK£0.14 a share, following on from the last 12 months, when the company distributed a total of UK£0.46 per share to shareholders. Based on the last year's worth of payments, Polar Capital Holdings has a trailing yield of 8.4% on the current stock price of UK£5.46. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Polar Capital Holdings
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year Polar Capital Holdings paid out 106% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings.
When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.
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. Readers will understand then, why we're concerned to see Polar Capital Holdings's earnings per share have dropped 5.6% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Polar Capital Holdings has lifted its dividend by approximately 6.3% a year on average. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Polar Capital Holdings is already paying out 106% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.