Yahoo Finance Don't Race Out To Buy Polar Capital Holdings plc (LON:POLR) Just Because It's Going Ex-Dividend
Polar Capital Holdings plc (LON:POLR) stock is about to trade ex-dividend in 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Polar Capital Holdings' shares before the 6th of July in order to be eligible for the dividend, which will be paid on the 28th of July.
The company's next dividend payment will be UK£0.32 per share, on the back of last year when the company paid a total of UK£0.46 to shareholders. Looking at the last 12 months of distributions, Polar Capital Holdings has a trailing yield of approximately 8.9% on its current stock price of £5.16. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Polar Capital Holdings has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Polar Capital Holdings
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. Polar Capital Holdings distributed an unsustainably high 125% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut.
Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about Polar Capital Holdings's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Polar Capital Holdings has lifted its dividend by approximately 13% a year on average.
The Bottom Line
From a dividend perspective, should investors buy or avoid Polar Capital Holdings? Polar Capital Holdings's earnings have barely moved in recent times, and the company is paying out a disagreeably high percentage of its earnings; a mediocre combination. Polar Capital Holdings 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.
Although, if you're still interested in Polar Capital Holdings and want to know more, you'll find it very useful to know what risks this stock faces. Case in point: We've spotted 1 warning sign for Polar Capital Holdings you should be aware of.
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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