Readers hoping to buy Pinnacle Financial Partners, Inc. (NASDAQ:PNFP) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 6th of February, you won't be eligible to receive this dividend, when it is paid on the 28th of February.
Pinnacle Financial Partners's next dividend payment will be US$0.16 per share. Last year, in total, the company distributed US$0.64 to shareholders. Last year's total dividend payments show that Pinnacle Financial Partners has a trailing yield of 1.1% on the current share price of $59.06. If you buy this business for its dividend, you should have an idea of whether Pinnacle Financial Partners's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Pinnacle Financial Partners paid out just 12% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Pinnacle Financial Partners has grown its earnings rapidly, up 21% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Pinnacle Financial Partners has delivered an average of 12% per year annual increase in its dividend, based on the past six years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Is Pinnacle Financial Partners an attractive dividend stock, or better left on the shelf? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating Pinnacle Financial Partners more closely.
Curious what other investors think of Pinnacle Financial Partners? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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