The PNC Financial Services Group, Inc. (NYSE:PNC) stock is about to trade ex-dividend in three days. This means that investors who purchase shares on or after the 16th of July will not receive the dividend, which will be paid on the 5th of August.
PNC Financial Services Group's upcoming dividend is US$1.15 a share, following on from the last 12 months, when the company distributed a total of US$4.60 per share to shareholders. Looking at the last 12 months of distributions, PNC Financial Services Group has a trailing yield of approximately 4.5% on its current stock price of $101.6. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether PNC Financial Services Group can afford its dividend, and if the dividend could grow.
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. PNC Financial Services Group paid out a comfortable 41% of its profit last year.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see PNC Financial Services Group earnings per share are up 7.7% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last ten years, PNC Financial Services Group has lifted its dividend by approximately 28% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Should investors buy PNC Financial Services Group for the upcoming dividend? PNC Financial Services Group has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. PNC Financial Services Group ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
On that note, you'll want to research what risks PNC Financial Services Group is facing. To that end, you should learn about the 2 warning signs we've spotted with PNC Financial Services Group (including 1 which shouldn't be ignored).
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.
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