Over the past 10 years People's United Financial, Inc. (NASDAQ:PBCT) has grown its dividend payouts from $0.60 to $0.70. With a market cap of US$6.5b, People's United Financial pays out 54% of its earnings, leading to a 4.2% yield. Let me elaborate on you why the stock stands out for income investors like myself.
What Is A Dividend Rock Star?
It is a stock that pays a reliable and steady dividend over the past decade, at a rate that is competitive relative to the other dividend-paying companies on the market. More specifically:
- It is paying an annual yield above 75% of dividend payers
- It consistently pays out dividend without missing a payment or significantly cutting payout
- Its dividend per share amount has increased over the past
- It is able to pay the current rate of dividends from its earnings
- It is able to continue to payout at the current rate in the future
High Yield And Dependable
People's United Financial's yield sits at 4.2%, which is high for Banks stocks. But the real reason People's United Financial stands out is because it has a high chance of being able to continue to pay dividend at this level for years to come, something that is quite desirable if you are looking to create a portfolio that generates a steady stream of income.
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 PBCT it has increased its DPS from $0.60 to $0.70 in the past 10 years. It has also been paying out dividend consistently during this time, as you'd expect for a company increasing its dividend levels. This is an impressive feat, which makes PBCT a true dividend rockstar.
The current trailing twelve-month payout ratio for the stock is 54%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect PBCT's payout to fall to 48% of its earnings. Assuming a constant share price, this equates to a dividend yield of 4.3%. However, EPS should increase to $1.37, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
There aren't many other stocks out there with the same track record as People's United Financial, so I would certainly recommend further examining the stock if its dividend characteristics appeal to you. However, given this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three relevant factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for PBCT’s future growth? Take a look at our free research report of analyst consensus for PBCT’s outlook.
- Valuation: What is PBCT 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 PBCT is currently mispriced by the market.
- Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.
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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.