Federated Hermes, Inc. (NYSE:FHI) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

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 one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. This means that investors who purchase Federated Hermes' shares on or after the 8th of May will not receive the dividend, which will be paid on the 15th of May.

The company's next dividend payment will be US$0.34 per share, on the back of last year when the company paid a total of US$1.36 to shareholders. Calculating the last year's worth of payments shows that Federated Hermes has a trailing yield of 3.3% on the current share price of US$41.71. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Our free stock report includes 1 warning sign investors should be aware of before investing in Federated Hermes. Read for free now.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Federated Hermes paid out a comfortable 35% of its profit last year.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

See our latest analysis for Federated Hermes

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Federated Hermes earnings per share are up 6.7% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Federated Hermes has delivered 3.1% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Federated Hermes an attractive dividend stock, or better left on the shelf? Federated Hermes has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, Federated Hermes looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

On that note, you'll want to research what risks Federated Hermes is facing. Every company has risks, and we've spotted 1 warning sign for Federated Hermes you should know about.

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.