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Readers hoping to buy Federated Hermes, Inc. (NYSE:FHI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Therefore, if you purchase Federated Hermes' shares on or after the 5th of May, you won't be eligible to receive the dividend, when it is paid on the 15th of May.
The company's upcoming dividend is US$0.28 a share, following on from the last 12 months, when the company distributed a total of US$1.12 per share to shareholders. Looking at the last 12 months of distributions, Federated Hermes has a trailing yield of approximately 2.7% on its current stock price of $41.39. If you buy this business for its dividend, you should have an idea of whether Federated Hermes's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Federated Hermes
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. Federated Hermes paid out a comfortable 38% of its profit last year.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Federated Hermes's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Federated Hermes has lifted its dividend by approximately 1.6% a year on average.