Over the past 10 years Principal Financial Group, Inc. (NASDAQ:PFG) has grown its dividend payouts from $0.45 to $2.16. With a market cap of US$14b, Principal Financial Group pays out 27% of its earnings, leading to a 4.3% yield. Let me elaborate on you why the stock stands out for income investors like myself.
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What Is A Dividend Rock Star?
It is a stock that pays a consistent, reliable and competitive dividend over a long period of time, and is expected to continue to pay in the same manner many years to come. More specifically:
- It is paying an annual yield above 75% 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 can afford 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
Principal Financial Group’s yield sits at 4.3%, which is high for Insurance stocks. But the real reason Principal Financial Group 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. PFG has increased its DPS from $0.45 to $2.16 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.
The current trailing twelve-month payout ratio for the stock is 27%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 40% which, assuming the share price stays the same, leads to a dividend yield of 4.7%. However, EPS is forecasted to fall to $5.38 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Principal Financial Group’s strong dividend attributes make it, without a doubt, a stock dividend investors should be considering for their portfolios. However, given this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three key aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for PFG’s future growth? Take a look at our free research report of analyst consensus for PFG’s outlook.
- Valuation: What is PFG 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 PFG 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.