Don't Buy Invesco Ltd. (NYSE:IVZ) For Its Next Dividend Without Doing These Checks
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. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Invesco's shares on or after the 8th of May, you won't be eligible to receive the dividend, when it is paid on the 2nd of June.
The company's next dividend payment will be US$0.20 per share, on the back of last year when the company paid a total of US$0.80 to shareholders. Last year's total dividend payments show that Invesco has a trailing yield of 4.9% on the current share price of $16.42. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Invesco
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Invesco paid out more than half (55%) of its earnings last year, which is a regular payout ratio for most companies.
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?
Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Invesco's earnings per share have dropped 13% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
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, Invesco has lifted its dividend by approximately 1.5% a year on average.
To Sum It Up
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. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
Although, if you're still interested in Invesco and want to know more, you'll find it very useful to know what risks this stock faces. For example, we've found 2 warning signs for Invesco that we recommend you consider before investing in the business.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
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