State Street Corporation (NYSE:STT) Is An Attractive Dividend Stock, Here’s Why
State Street Corporation (NYSE:STT) has pleased shareholders over the past 10 years, by paying out dividends. The stock currently pays out a dividend yield of 2.8%, and has a market cap of US$28b. Let’s dig deeper into whether State Street should have a place in your portfolio.
View our latest analysis for State Street
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
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?
Can it afford to pay the current rate of dividends from its earnings?
Will the company be able to keep paying dividend based on the future earnings growth?
How well does State Street fit our criteria?
The company currently pays out 27% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect STT’s payout to remain around the same level at 27% of its earnings, which leads to a dividend yield of 3.0%. In addition to this, EPS should increase to $7.44.
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. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of STT it has increased its DPS from $0.96 to $1.88 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Relative to peers, State Street generates a yield of 2.8%, which is high for Capital Markets stocks but still below the market’s top dividend payers.
Next Steps:
Taking into account the dividend metrics, State Street ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three essential aspects you should look at:
Future Outlook: What are well-informed industry analysts predicting for STT’s future growth? Take a look at our free research report of analyst consensus for STT’s outlook.
Valuation: What is STT 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 STT 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 editorial-team@simplywallst.com.
