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Have you been keeping an eye on Prudential plc’s (LON:PRU) upcoming dividend of UK£0.16 per share payable on the 27 September 2018? Then you only have 2 days left before the stock starts trading ex-dividend on the 23 August 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Prudential’s latest financial data to analyse its dividend attributes.
Check out our latest analysis for Prudential
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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Is its annual yield among the top 25% of dividend-paying companies?
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Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
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Has dividend per share amount increased over the past?
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Is its earnings sufficient to payout dividend at the current rate?
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Will it be able to continue to payout at the current rate in the future?
How well does Prudential fit our criteria?
The company currently pays out 55.31% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 32.92%, leading to a dividend yield of around 3.30%. However, EPS should increase to £1.47, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
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 PRU it has increased its DPS from £0.18 to £0.47 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. These are all positive signs of a great, reliable dividend stock.
In terms of its peers, Prudential produces a yield of 2.73%, which is on the low-side for Insurance stocks.
Next Steps:
Keeping in mind the dividend characteristics above, Prudential is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three important factors you should further examine:
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Future Outlook: What are well-informed industry analysts predicting for PRU’s future growth? Take a look at our free research report of analyst consensus for PRU’s outlook.
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Valuation: What is PRU 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 PRU is currently mispriced by the market.
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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 editorial-team@simplywallst.com.