Advertising and marketing agency Omnicom Group (OMC) currently yields 2.5%. Not bad. Better still, it has cranked up its quarterly payout from 15 cents per share in 2009 to a hefty 40 cents per quarter as of this year.
You’d think that the near-tripling of the dividend would mean earnings have also tripled during that time. But you’d be wrong. In 2009, the 60-cent dividends were 23% of the $2.53 per share earnings. In 2012, the annual dividend total reached $1.20 per share, or 33% the $3.61 earned. This year, the company’s on pace to pay out $1.60 per share – a whopping 41% of the projected profit of $3.88.
Bottom line? Shareholders have become accustomed to increases, but the dividend’s growth rate is getting to the point where it can’t continue to improve. That won’t go over very well.