Is Cullen/Frost Bankers Inc (NYSE:CFR) A Good Pick For Income Investors?
Cullen/Frost Bankers Inc (NYSE:CFR) has pleased shareholders over the past 10 years, paying out an average dividend of 3.00% annually. The company pays out a dividend yield of 2.28% to shareholders, making it a relatively attractive dividend stock. Does Cullen/Frost Bankers tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for Cullen/Frost Bankers
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is its annual yield among the top 25% of dividend payers?
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
Has the amount of dividend per share grown over the past?
Is its earnings sufficient to payout dividend at the current rate?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Cullen/Frost Bankers fit our criteria?
Cullen/Frost Bankers has a payout ratio of 41.87%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 37.63%, leading to a dividend yield of 2.40%. However, EPS should increase to $5.88, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. 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 $1.6 to $2.28 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. In terms of its peers, Cullen/Frost Bankers produces a yield of 2.28%, which is on the low-side for banks stocks.
Next Steps:
Taking into account the dividend metrics, Cullen/Frost Bankers 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, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three relevant aspects you should look at:
1. 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.
2. 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.
3. 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 pass 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.
