Assessing the Upcoming Dividend and Long-Term Sustainability
Prudential Financial Inc (NYSE:PRU) recently announced a dividend of $1.25 per share, payable on 2023-12-14, with the ex-dividend date set for 2023-11-20. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Prudential Financial Inc's dividend performance and assess its sustainability.
What Does Prudential Financial Inc Do?
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Prudential Financial is a large, diversified insurance company offering annuities, life insurance, retirement plan services, and asset management products. While it operates in a number of countries, the vast majority of revenue is generated in the United States and Japan. The company's investment management business, PGIM, contributes approximately 15% of its earnings and has over $1.5 trillion in assets under management. The U.S. businesses are responsible for about 45% of earnings and can be classified into Institutional Retirement Strategies, Individual Retirement Strategies, Group Insurance, Individual Life Insurance, and Assurance IQ. Finally, the international business segment of the company contributes approximately 40% of earnings with a strong market position in Japan.
A Glimpse at Prudential Financial Inc's Dividend History
Prudential Financial Inc has maintained a consistent dividend payment record since 2002. Dividends are currently distributed on a quarterly basis. Prudential Financial Inc has increased its dividend each year since 2008. The stock is thus listed as a dividend achiever, an honor that is given to companies that have increased their dividend each year for at least the past 15 years.
Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Prudential Financial Inc's Dividend Yield and Growth
As of today, Prudential Financial Inc currently has a 12-month trailing dividend yield of 5.17% and a 12-month forward dividend yield of 5.22%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Prudential Financial Inc's annual dividend growth rate was 6.30%. Extended to a five-year horizon, this rate increased to 9.50% per year. And over the past decade, Prudential Financial Inc's annual dividends per share growth rate stands at an impressive 12.30%.
Based on Prudential Financial Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Prudential Financial Inc stock as of today is approximately 8.14%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, Prudential Financial Inc's dividend payout ratio is 1.40, which may suggest that the company's dividend may not be sustainable.
Prudential Financial Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Prudential Financial Inc's profitability 6 out of 10 as of 2023-09-30, suggesting fair profitability. The company has reported net profit in 7 years out of the past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Prudential Financial Inc's growth rank of 6 out of 10 suggests that the company has a fair growth outlook. Revenue is the lifeblood of any company, and Prudential Financial Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Prudential Financial Inc's revenue has increased by approximately 0.70% per year on average, a rate that underperforms approximately 64.32% of global competitors.
Concluding Thoughts on Prudential Financial Inc's Dividend Profile
Prudential Financial Inc's recent dividend announcement is a testament to its commitment to returning value to shareholders. The company's track record as a dividend achiever and its impressive dividend growth rates over various time frames are noteworthy. However, investors must also consider the sustainability of these dividends, given the payout ratio and profitability metrics. While the payout ratio appears high, which could raise questions about long-term sustainability, Prudential Financial Inc's profitability and growth ranks indicate a stable financial position that may support ongoing dividend payments. Value investors will want to keep an eye on these factors as they consider the potential for Prudential Financial Inc to remain a reliable source of dividend income.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.