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Don't Race Out To Buy Prudential Financial, Inc. (NYSE:PRU) Just Because It's Going Ex-Dividend

Simply Wall St
·3 min read

Readers hoping to buy Prudential Financial, Inc. (NYSE:PRU) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 24th of August in order to receive the dividend, which the company will pay on the 17th of September.

Prudential Financial's next dividend payment will be US$1.10 per share, on the back of last year when the company paid a total of US$4.40 to shareholders. Last year's total dividend payments show that Prudential Financial has a trailing yield of 6.4% on the current share price of $68.57. If you buy this business for its dividend, you should have an idea of whether Prudential Financial's dividend is reliable and sustainable. So we need to investigate whether Prudential Financial can afford its dividend, and if the dividend could grow.

See our latest analysis for Prudential Financial

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Prudential Financial reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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historic-dividend

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Prudential Financial reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Prudential Financial has lifted its dividend by approximately 20% a year on average.

Get our latest analysis on Prudential Financial's balance sheet health here.

The Bottom Line

From a dividend perspective, should investors buy or avoid Prudential Financial? It's hard to get past the idea of Prudential Financial paying a dividend despite reporting a loss over the past year - especially when the general trend in its earnings also looks to be negative. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

Although, if you're still interested in Prudential Financial and want to know more, you'll find it very useful to know what risks this stock faces. Our analysis shows 3 warning signs for Prudential Financial that we strongly recommend you have a look at before investing in the company.

If you're in the market for dividend stocks, we recommend checking our list of top 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.