Provident Financial Services, Inc. (NYSE:PFS) stock is about to trade ex-dividend in 4 days time. Investors can purchase shares before the 14th of August in order to be eligible for this dividend, which will be paid on the 30th of August.
Provident Financial Services's next dividend payment will be US$0.23 per share, and in the last 12 months, the company paid a total of US$0.92 per share. Looking at the last 12 months of distributions, Provident Financial Services has a trailing yield of approximately 3.9% on its current stock price of $23.88. 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 Provident Financial Services can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Provident Financial Services paid out a comfortable 45% 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?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Provident Financial Services, with earnings per share up 9.6% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Provident Financial Services has delivered 7.7% dividend growth per year on average over the past 10 years. 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
Has Provident Financial Services got what it takes to maintain its dividend payments? Provident Financial Services 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. We think this is a pretty attractive combination, and would be interested in investigating Provident Financial Services more closely.
Curious what other investors think of Provident Financial Services? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
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.
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