There is a lot to be liked about Cullen/Frost Bankers Inc (NYSE:CFR) as an income stock. It has paid dividends over the past 10 years. The company currently pays out a dividend yield of 2.9% to shareholders, making it a relatively attractive dividend stock. Let’s dig deeper into whether Cullen/Frost Bankers should have a place in your portfolio.
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it the top 25% annual dividend yield payer?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has the amount of dividend per share grown over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
Does Cullen/Frost Bankers pass our checks?
The company currently pays out 38% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect CFR’s payout to remain around the same level at 37% of its earnings, which leads to a dividend yield of 2.9%. Furthermore, EPS should increase to $7.08.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. 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 CFR it has increased its DPS from $1.68 to $2.68 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Cullen/Frost Bankers has a yield of 2.9%, which is high for Banks stocks but still below the market’s top dividend payers.
With this in mind, I definitely rank Cullen/Frost Bankers as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three important factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for CFR’s future growth? Take a look at our free research report of analyst consensus for CFR’s outlook.
- Valuation: What is CFR 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 CFR 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 firstname.lastname@example.org.