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Principal Financial Group, Inc. (NASDAQ:PFG) has announced that it will be increasing its dividend on the 24th of September to US$0.63. This takes the dividend yield to 3.8%, which shareholders will be pleased with.
Principal Financial Group's Earnings Easily Cover the Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Principal Financial Group's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 13.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.
Principal Financial Group Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the first annual payment was US$0.55, compared to the most recent full-year payment of US$2.52. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
We Could See Principal Financial Group's Dividend Growing
Investors could be attracted to the stock based on the quality of its payment history. Principal Financial Group has seen EPS rising for the last five years, at 6.4% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
Principal Financial Group Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 8 Principal Financial Group analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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