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Fifth Third Bancorp (NASDAQ:FITB) Is Due To Pay A Dividend Of US$0.27

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·2 min read
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The board of Fifth Third Bancorp (NASDAQ:FITB) has announced that it will pay a dividend of US$0.27 per share on the 15th of July. The dividend yield will be 2.9% based on this payment which is still above the industry average.

See our latest analysis for Fifth Third Bancorp

Fifth Third Bancorp's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Fifth Third Bancorp is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to expand by 21.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

historic-dividend
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Fifth Third Bancorp Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from US$0.04 in 2011 to the most recent annual payment of US$1.08. This implies that the company grew its distributions at a yearly rate of about 39% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Fifth Third Bancorp Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Fifth Third Bancorp has been growing its earnings per share at 6.4% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Fifth Third Bancorp's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Fifth Third Bancorp is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Fifth Third Bancorp (1 doesn't sit too well with us!) that you should be aware of before investing. We have also put together a list of global stocks with a solid 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 (at) simplywallst.com.