Should You Buy JPMorgan Chase & Co. (NYSE:JPM) For Its Upcoming Dividend?
JPMorgan Chase & Co. (NYSE:JPM) is about to trade ex-dividend in the next three days. If you purchase the stock on or after the 5th of October, you won't be eligible to receive this dividend, when it is paid on the 31st of October.
JPMorgan Chase's next dividend payment will be US$0.90 per share. Last year, in total, the company distributed US$3.60 to shareholders. Looking at the last 12 months of distributions, JPMorgan Chase has a trailing yield of approximately 3.7% on its current stock price of $96.27. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for JPMorgan Chase
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately JPMorgan Chase's payout ratio is modest, at just 48% of profit.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at JPMorgan Chase, with earnings per share up 7.0% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, JPMorgan Chase has lifted its dividend by approximately 34% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
From a dividend perspective, should investors buy or avoid JPMorgan Chase? JPMorgan Chase has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. We think this is a pretty attractive combination, and would be interested in investigating JPMorgan Chase more closely.
Wondering what the future holds for JPMorgan Chase? See what the 18 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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