Acadian Asset Management Inc.'s (NYSE:AAMI) dividend will be increasing from last year's payment of the same period to $0.10 on 27th of March. Although the dividend is now higher, the yield is only 0.8%, which is below the industry average.

Acadian Asset Management's Payment Could Potentially Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Acadian Asset Management was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

EPS is set to fall by 3.6% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 4.8%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2016, the annual payment back then was $0.32, compared to the most recent full-year payment of $0.40. This means that it has been growing its distributions at 2.3% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that Acadian Asset Management's earnings per share has fallen at approximately 3.6% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Acadian Asset Management's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Acadian Asset Management's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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.