Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that People's United Financial, Inc. (NASDAQ:PBCT) is about to go ex-dividend in just 4 days. If you purchase the stock on or after the 31st of July, you won't be eligible to receive this dividend, when it is paid on the 15th of August.
People's United Financial's next dividend payment will be US$0.18 per share. Last year, in total, the company distributed US$0.71 to shareholders. Looking at the last 12 months of distributions, People's United Financial has a trailing yield of approximately 4.3% on its current stock price of $16.54. If you buy this business for its dividend, you should have an idea of whether People's United Financial'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 from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. People's United Financial is paying out an acceptable 54% of its profit, a common payout level among most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see People's United Financial's earnings per share have risen 12% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, People's United Financial has increased its dividend at approximately 1.7% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
To Sum It Up
Should investors buy People's United Financial for the upcoming dividend? People's United Financial has an acceptable payout ratio and its earnings per share have been improving at a decent rate. Overall, People's United Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Ever wonder what the future holds for People's United Financial? See what the nine analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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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. Thank you for reading.