Over the past 10 years KeyCorp (NYSE:KEY) has been paying dividends to shareholders. The company currently pays out a dividend yield of 4.8% to shareholders, making it a relatively attractive dividend stock. Let’s dig deeper into whether KeyCorp should have a place in your portfolio.
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is its annual yield among the top 25% of dividend-paying companies?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has it increased its dividend per share amount over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How well does KeyCorp fit our criteria?
The current trailing twelve-month payout ratio for the stock is 35%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 41% which, assuming the share price stays the same, leads to a dividend yield of around 4.9%. Furthermore, EPS should increase to $1.87. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Although KEY’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Relative to peers, KeyCorp generates a yield of 4.8%, which is high for Banks stocks.
Keeping in mind the dividend characteristics above, KeyCorp is definitely worth considering for investors looking to build a dedicated income portfolio. Given that 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 key factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for KEY’s future growth? Take a look at our free research report of analyst consensus for KEY’s outlook.
- Valuation: What is KEY 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 KEY is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger 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 email@example.com.