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Virtus Investment Partners, Inc.'s (NASDAQ:VRTS) dividend will be increasing from last year's payment of the same period to $1.65 on 15th of November. The payment will take the dividend yield to 2.8%, which is in line with the average for the industry.
See our latest analysis for Virtus Investment Partners
Virtus Investment Partners' Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Virtus Investment Partners was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS could expand by 32.8% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.
Virtus Investment Partners Is Still Building Its Track Record
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2014, the dividend has gone from $1.80 total annually to $6.00. This means that it has been growing its distributions at 16% per annum over that time. Virtus Investment Partners has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Virtus Investment Partners has impressed us by growing EPS at 33% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
We Really Like Virtus Investment Partners' Dividend
Overall, a dividend increase is always good, and we think that Virtus Investment Partners is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Virtus Investment Partners that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.