Westwood Holdings Group, Inc. (NYSE:WHG) will pay a dividend of $0.15 on the 3rd of January. Based on this payment, the dividend yield on the company's stock will be 4.1%, which is an attractive boost to shareholder returns.

View our latest analysis for Westwood Holdings Group

Westwood Holdings Group's Future Dividends May Potentially Be At Risk

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Westwood Holdings Group's profits didn't cover the dividend, but the company was generating enough cash instead. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

EPS is set to fall by 20.3% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 198%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was $1.76 in 2014, and the most recent fiscal year payment was $0.60. The dividend has fallen 66% over that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Westwood Holdings Group's earnings per share has shrunk at 20% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Westwood Holdings Group's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for Westwood Holdings Group that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.