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Why Principal Financial (PFG) is a Great Dividend Stock Right Now

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Principal Financial in Focus

Headquartered in Des Moines, Principal Financial (PFG) is a Finance stock that has seen a price change of 3.23% so far this year. Currently paying a dividend of $0.69 per share, the company has a dividend yield of 3.4%. In comparison, the Financial - Investment Management industry's yield is 2.73%, while the S&P 500's yield is 1.61%.

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Looking at dividend growth, the company's current annualized dividend of $2.76 is up 6.2% from last year. Principal Financial has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 5.15%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Principal Financial's current payout ratio is 41%, meaning it paid out 41% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for PFG for this fiscal year. The Zacks Consensus Estimate for 2024 is $7.50 per share, representing a year-over-year earnings growth rate of 14.50%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, PFG is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).

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Principal Financial Group, Inc. (PFG) : Free Stock Analysis Report

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