Principal Financial Group, Inc. (NASDAQ: PFG) the dividend will increase to $ 0.64 on December 21. This will bring the dividend yield to an attractive level of 3.6%, which will give a good boost to returns for shareholders.
Check out our latest analysis for Principal Financial Group
Principal Financial Group profits easily cover distributions
While it’s great to have a strong dividend yield, we also need to determine if the payout is sustainable. However, prior to this announcement, Principal Financial Group’s dividend was comfortably covered by both cash flow and earnings. This means that most of its profits are kept to grow the business.
Over the next year, EPS is expected to increase by 5.3%. Assuming the dividend continues on recent trends, we think the payout ratio could reach 39% by next year, which is in a fairly sustainable range.
Principal Financial Group has a solid track record
Even over a long history of paying dividends, the company’s distributions have been remarkably stable. Since 2011, the dividend has increased from US $ 0.55 to US $ 2.56. This implies that the company has increased its distributions at an annual rate of approximately 17% over this period. We can see that the payments have shown a very nice upward momentum without weakening, which gives reassurance that future payments will also be reliable.
The dividend has growth potential
Investors might be attracted to the stock depending on the quality of its payment history. It is encouraging to see that Principal Financial Group has increased its earnings per share by 8.3% per year over the past five years. EPS growth bodes well for the dividend, as does the low payout ratio the company is currently reporting.
We really like the Principal Financial Group dividend
Overall, a rise in dividends is always good, and we think Principal Financial Group is a solid income stock thanks to its track record and growing earnings. Distributions are quite easily covered by profits, which are also converted into cash flow. All of these factors taken into account, we believe this has strong potential as a dividend-paying stock.
Market movements testify to the high value of a coherent dividend policy compared to a more unpredictable one. At the same time, there are other factors that our readers should be aware of before investing any capital in a stock. Earnings growth generally bodes well for the future value of the company’s dividend payments. See if the top 8 financial group analysts we follow expect continued growth with our free report on analysts’ estimates for the company. If you are a dividend investor, you can also check out our curated list of high performing dividend stocks.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
Do you have any feedback on this item? Are you worried about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.