Why Principal Financial (PFG) is a Great Dividend Stock Right Now
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Principal Financial in Focus
Based in Des Moines, Principal Financial (PFG) is in the Finance sector, and so far this year, shares have seen a price change of 0.34%. The financial services company is paying out a dividend of $0.67 per share at the moment, with a dividend yield of 3.39% compared to the Financial - Investment Management industry's yield of 3.14% and the S&P 500's yield of 1.57%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.68 is up 3.1% from last year. Over the last 5 years, Principal Financial has increased its dividend 4 times on a year-over-year basis for an average annual increase of 4.99%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Principal Financial's payout ratio is 40%, which means it paid out 40% of its trailing 12-month EPS as dividend.
PFG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $7.46 per share, which represents a year-over-year growth rate of 13.89%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, PFG presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Principal Financial Group, Inc. (PFG) : Free Stock Analysis Report
