If you are an income investor, then Power Financial Corporation (TSE:PWF) should be on your radar. Power Financial Corporation provides financial services in Canada, the United States, Europe, and Asia. Over the past 10 years, the CA$19b market cap company has been growing its dividend payments, from CA$1.4 to CA$1.82. Currently yielding 6.4%, let's take a closer look at Power Financial's dividend profile.
What Is A Dividend Rock Star?
It is a stock that pays a reliable and steady dividend over the past decade, at a rate that is competitive relative to the other dividend-paying companies on the market. More specifically:
- Its annual yield is among the top 25% of dividend payers
- It consistently pays out dividend without missing a payment or significantly cutting payout
- Its has increased its dividend per share amount over the past
- It is able to pay the current rate of dividends from its earnings
- It is able to continue to payout at the current rate in the future
High Yield And Dependable
The company's dividend yield stands at 6.4%, which is high for Insurance stocks. But the real reason Power Financial stands out is because it has a high chance of being able to continue to pay dividend at this level for years to come, something that is quite desirable if you are looking to create a portfolio that generates a steady stream of income.
If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. In the case of PWF it has increased its DPS from CA$1.4 to CA$1.82 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.
Power Financial has a trailing twelve-month payout ratio of 57%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect PWF's payout to fall to 50% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 6.4%. However, EPS should increase to CA$3.21, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
With Power Financial producing strong dividend income for your portfolio over the past few years, you can take comfort in knowing that this stock will still continue to be a top dividend generator moving forward. However, given this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I've compiled three key factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for PWF’s future growth? Take a look at our free research report of analyst consensus for PWF’s outlook.
- Valuation: What is PWF 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 PWF is currently mispriced by the market.
- Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.