Many dividend investors probably haven't looked into Piper Jaffray (PJC +1.99%) as a dividend investment yet. If they have, chances are their interest in the stock began earlier this month, when the investment bank and asset management firm announced its first increase for its quarterly dividend, as well as shared plans for an aggressive annual special dividend policy.
After initiating its dividend in the beginning of 2017, Jaffray has quickly evolved into a compelling dividend investment. And management's recent decision to revise its dividend policy to one that caters to income investors more favorably solidifies its attractiveness as a dividend stock.
Here's a close look at Piper Jaffray's dividend, and why income investors should consider it -- despite its short dividend history and small dividend yield.
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Piper Jaffray's dividend
|
Dividend Yield |
Payout Ratio |
Most Recent Dividend Increase |
Market Capitalization |
|---|---|---|---|
|
1.7% |
19%* |
20% |
$1.1 billion |
*Calculated using trailing-9-month financial data since Piper Jaffray has only been paying a dividend for three quarters. In addition, the payout ratio is calculated with trailing-9-month dividends paid as a percentage of adjusted net income instead of regular net income. Data source: Piper Jaffray Q3 earnings release and Reuters. Table by author.
In a Nov. 9 press release, Piper Jaffray notably announced its first dividend increase since initiating a dividend earlier this year, increasing it by a nice 20%. But it also announced a dividend policy intended to return 30% to 50% of non-GAAP net income from the previous fiscal year, payable in the first quarter of each fiscal year. In other words, each year, Jaffray will pay out a special dividend large enough to ensure it is paying out 30% to 50% of the previous year's non-GAAP net income after taking into account its regular quarterly dividends paid throughout the year.
After noting in its recent press release that the new policy demonstrates the huge success of its advisory business, Piper Jaffray CEO Andrew Duff explained the dividend strategy:
The level of earnings we are now generating allows us to take a balanced approach of returning capital to our shareholders while continuing to invest in the business to drive growth and enhance shareholder returns. We will continue to pursue both organic and strategic opportunities that we believe make sense for our company and shareholders.
Dividend growth ahead
Paying out just 19% of its adjusted net income since it initiated its dividend earlier this year, there's plenty of room for dividend increases and future special dividends. Making future dividend growth easier, the investment bank and asset management firm has benefited from significant success recently. Its adjusted net income in the nine months ending Sept. 30 was up 78.5% compared to the same period last year.
But investors should be prepared for a bumpy ride. Jaffray's business is likely to be more volatile and cyclical on a quarter-to-quarter and even year-to-year basis than the stable income investments dividend investors are typically attracted to. However, the company's recent record revenue and its impressive growth in its advisory business suggest Jaffray's dividend is poised for growth over the long haul -- even if the growth trajectory features an occasional blip.
