Have you been keeping an eye on Power Financial Corporation’s (TSE:PWF) upcoming dividend of CA$0.43 per share payable on the 01 November 2018? Then you only have 4 days left before the stock starts trading ex-dividend on the 27 September 2018. What does this mean for current shareholders and potential investors? Below, I will explain how holding Power Financial can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
What Is A Dividend Rock Star?
It is a stock that pays a stable and consistent dividend, having done so reliably for the past decade with the expectation of this continuing into the future. 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 has the ability to keep paying its dividends going forward
High Yield And Dependable
Power Financial’s dividend yield stands at 5.7%, which is high for Insurance stocks. But the real reason Power Financial stands out is because it has a proven track record of continuously paying out this level of dividends, from earnings, to shareholders and can be expected to continue paying in the future. This is a highly desirable trait for a stock holding if you’re investor who wants a robust cash inflow from your portfolio over a long period of time.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. PWF has increased its DPS from CA$1.34 to CA$1.73 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes PWF a true dividend rockstar.
The current trailing twelve-month payout ratio for the stock is 62.5%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 47.6%, leading to a dividend yield of around 5.7%. However, EPS should increase to CA$3.52, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
There aren’t many other stocks out there with the same track record as Power Financial, so I would certainly recommend further examining the stock if its dividend characteristics appeal to you. 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. There are three pertinent factors you should further research:
- 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.