Eaton Vance Corp. (NYSE:EV) stock is about to trade ex-dividend in 4 days. If you purchase the stock on or after the 29th of October, you won't be eligible to receive this dividend, when it is paid on the 13th of November.
Eaton Vance's upcoming dividend is US$0.38 a share, following on from the last 12 months, when the company distributed a total of US$1.50 per share to shareholders. Based on the last year's worth of payments, Eaton Vance stock has a trailing yield of around 2.4% on the current share price of $62.06. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Eaton Vance paid out more than half (58%) 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.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Eaton Vance's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Eaton Vance has increased its dividend at approximately 8.9% a year on average.
To Sum It Up
Is Eaton Vance an attractive dividend stock, or better left on the shelf? Eaton Vance has been struggling to generate growth while also paying out more than half of its earnings to shareholders as dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.
If you're not too concerned about Eaton Vance's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Our analysis shows 2 warning signs for Eaton Vance and you should be aware of them before buying any shares.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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