Tompkins Financial Corporation (NYSEMKT:TMP) has pleased shareholders over the past 10 years, by paying out dividends. The company currently pays out a dividend yield of 2.6% to shareholders, making it a relatively attractive dividend stock. Should it have a place in your portfolio? Let’s take a look at Tompkins Financial in more detail.
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it the top 25% annual dividend yield payer?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share risen in the past couple of years?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
How well does Tompkins Financial fit our criteria?
The company currently pays out 44% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect TMP’s payout to fall to 35% of its earnings, which leads to a dividend yield of 2.6%. However, EPS should increase to $5.57, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. TMP has increased its DPS from $1.24 to $2 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.
In terms of its peers, Tompkins Financial generates a yield of 2.6%, which is on the low-side for Banks stocks.
Taking into account the dividend metrics, Tompkins Financial 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 key factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for TMP’s future growth? Take a look at our free research report of analyst consensus for TMP’s outlook.
- Valuation: What is TMP 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 TMP 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 firstname.lastname@example.org.