The PNC Financial Services Group, Inc.’s (NYSE:PNC) periodic dividend will be increasing on the 5th of August to $1.60, with investors receiving 3.2% more than last year’s $1.55. This will take the annual payment to 4.0% of the stock price, which is above what most companies in the industry pay.
Check out our latest analysis for PNC Financial Services Group
PNC Financial Services Group’s Earnings Will Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.
PNC Financial Services Group has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on PNC Financial Services Group’s last earnings report, the payout ratio is at a decent 52%, meaning that the company is able to pay out its dividend with a bit of room to spare.
The next 3 years are set to see EPS grow by 36.3%. Analysts forecast the future payout ratio could be 41% over the same time horizon, which is a number we think the company can maintain.
PNC Financial Services 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. Since 2014, the dividend has gone from $1.76 total annually to $6.20. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
Dividend Growth May Be Hard To Achieve
Some investors will be chomping at the bit to buy some of the company’s stock based on its dividend history. However, PNC Financial Services Group has only grown its earnings per share at 2.6% per annum over the past five years. PNC Financial Services Group is struggling to find viable investments, so it is returning more to shareholders. This isn’t bad in itself, but unless earnings growth pick up we wouldn’t expect dividends to grow either.
We Really Like PNC Financial Services Group’s Dividend
Overall, a dividend increase is always good, and we think that PNC Financial Services Group is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 17 PNC Financial Services Group analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is PNC Financial Services Group not quite the opportunity you were looking for? Why not check out our selection of top 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.
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Source: finance.yahoo.com
