If you are interested in cashing in on Pinnacle West Capital Corporation's (NYSE:PNW) upcoming dividend of US$0.74 per share, you only have 3 days left to buy the shares before its ex-dividend date, 30 April 2019, in time for dividends payable on the 03 June 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Pinnacle West Capital's latest financial data to analyse its dividend attributes.
5 checks you should use to assess a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it paying an annual yield above 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has it increased its dividend per share amount over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Pinnacle West Capital fare?
Pinnacle West Capital has a trailing twelve-month payout ratio of 62%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect PNW's payout to remain around the same level at 64% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 3.3%. Furthermore, EPS should increase to $4.86.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of PNW it has increased its DPS from $2.1 to $2.95 in the past 10 years. It has also been paying out dividend consistently during this time, as you'd expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.
In terms of its peers, Pinnacle West Capital produces a yield of 3.1%, which is on the low-side for Electric Utilities stocks.
With these dividend metrics in mind, I definitely rank Pinnacle West Capital as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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. I've put together three key aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for PNW’s future growth? Take a look at our free research report of analyst consensus for PNW’s outlook.
- Historical Performance: What has PNW's returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other Dividend Rockstars: Are there better dividend payers with stronger 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 email@example.com. 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.