In This Article:
The board of KeyCorp (NYSE:KEY) has announced that it will pay a dividend of $0.205 per share on the 15th of September. The dividend yield will be 6.5% based on this payment which is still above the industry average.
See our latest analysis for KeyCorp
KeyCorp's Payment Expected To Have Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.
KeyCorp has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but KeyCorp's payout ratio of 54% is a good sign as this means that earnings decently cover dividends.
Over the next 3 years, EPS is forecast to expand by 30.6%. Analysts forecast the future payout ratio could be 45% over the same time horizon, which is a number we think the company can maintain.
KeyCorp Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.20 in 2013, and the most recent fiscal year payment was $0.82. This means that it has been growing its distributions at 15% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
KeyCorp May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. However, KeyCorp has only grown its earnings per share at 2.4% per annum over the past five years. The company has been growing at a pretty soft 2.4% per annum, and is paying out quite a lot of its earnings to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.
We Really Like KeyCorp's Dividend
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 16 analysts we track are forecasting for KeyCorp for free with public analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.