Yahoo Finance Prudential Financial Inc (NYSE:PRU) Is An Attractive Dividend Stock, Here’s Why
There is a lot to be liked about Prudential Financial Inc (NYSE:PRU) as an income stock. It has paid dividends over the past 10 years. The company currently pays out a dividend yield of 3.8% to shareholders, making it a relatively attractive dividend stock. Does Prudential Financial tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Check out our latest analysis for Prudential Financial
5 questions I ask before picking a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is its annual yield among the top 25% of dividend-paying companies?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has dividend per share risen in the past couple of years?
Is is able to pay the current rate of dividends from its earnings?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Prudential Financial fare?
The current trailing twelve-month payout ratio for the stock is 19%, which means that the dividend is covered by earnings. Going forward, analysts expect PRU’s payout to increase to 30% of its earnings, which leads to a dividend yield of around 4.0%. However, EPS is forecasted to fall to $11.04 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of PRU it has increased its DPS from $1.15 to $3.6 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes PRU a true dividend rockstar.
Compared to its peers, Prudential Financial generates a yield of 3.8%, which is high for Insurance stocks.
Next Steps:
Taking into account the dividend metrics, Prudential Financial ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three key factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for PRU’s future growth? Take a look at our free research report of analyst consensus for PRU’s outlook.
Valuation: What is PRU worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether PRU is currently mispriced by the market.
Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
