Silvercrest Asset Management Group Inc.'s (NASDAQ:SAMG) investors are due to receive a payment of $0.20 per share on 20th of December. This will take the annual payment to 4.9% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Silvercrest Asset Management Group

Silvercrest Asset Management Group's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 98% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 61%. 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.

Over the next year, EPS is forecast to expand by 90.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 53%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Silvercrest Asset Management Group Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.48 in 2014 to the most recent total annual payment of $0.80. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth May Be Hard To Come By

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. In the last five years, Silvercrest Asset Management Group's earnings per share has shrunk at approximately 5.7% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Silvercrest Asset Management Group will make a great income stock. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 2 warning signs for Silvercrest Asset Management Group that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.