The board of State Street Corporation (NYSE:STT) has announced that it will be paying its dividend of $0.63 on the 13th of October, an increased payment from last year's comparable dividend. This makes the dividend yield 4.0%, which is above the industry average.
State Street's Payment Expected To Have Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.
State Street has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 31%, which means that State Street would be able to pay its last dividend without pressure on the balance sheet.
Looking forward, EPS is forecast to rise by 30.0% over the next 3 years. Analysts forecast the future payout ratio could be 32% over the same time horizon, which is a number we think the company can maintain.
State Street Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.72 in 2012 to the most recent total annual payment of $2.52. This implies that the company grew its distributions at a yearly rate of about 13% 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 State Street's Dividend Growing
The company's investors will be pleased to have been receiving dividend income for some time. State Street has seen EPS rising for the last five years, at 5.6% per annum. State Street definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
State Street Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 12 State Street analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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