Readers hoping to buy Virtus Investment Partners, Inc. (NASDAQ:VRTS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company’s record date, which is the date on which the company determines which shareholders are entitled 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 days to settle. Thus, you can purchase Virtus Investment Partners’ shares before the 28th of October in order to receive the dividend, which the company will pay on the 15th of November.
The company’s upcoming dividend is US$1.65 a share, following on from the last 12 months, when the company distributed a total of US$6.00 per share to shareholders. Calculating the last year’s worth of payments shows that Virtus Investment Partners has a trailing yield of 4.1% on the current share price of $161.93. 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 investigate whether Virtus Investment Partners can afford its dividend, and if the dividend could grow.
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. That’s why it’s good to see Virtus Investment Partners paying out a modest 29% of its earnings.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. It’s encouraging to see Virtus Investment Partners has grown its earnings rapidly, up 28% a year for the past five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Virtus Investment Partners has delivered 18% dividend growth per year on average over the past eight years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Is Virtus Investment Partners worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly – this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating Virtus Investment Partners more closely.
In light of that, while Virtus Investment Partners has an appealing dividend, it’s worth knowing the risks involved with this stock. To help with this, we’ve discovered 1 warning sign for Virtus Investment Partners that you should be aware of before investing in their shares.
If you’re in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Valuation is complex, but we’re helping make it simple.
Find out whether Virtus Investment Partners is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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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 into account 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.