Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see KeyCorp (NYSE:KEY) is about to trade ex-dividend in the next 2 days. You can purchase shares before the 1st of June in order to receive the dividend, which the company will pay on the 15th of June.
KeyCorp’s next dividend payment will be US$0.18 per share, on the back of last year when the company paid a total of US$0.74 to shareholders. Last year’s total dividend payments show that KeyCorp has a trailing yield of 6.1% on the current share price of $12.09. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for KeyCorp
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. KeyCorp paid out more than half (53%) of its earnings last year, which is a regular payout ratio for most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it’s a relief to see KeyCorp earnings per share are up 5.4% per annum over the last five years.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the last ten years, KeyCorp has lifted its dividend by approximately 34% a year on average. It’s encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
From a dividend perspective, should investors buy or avoid KeyCorp? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. We’re unconvinced on the company’s merits, and think there might be better opportunities out there.
With that being said, if dividends aren’t your biggest concern with KeyCorp, you should know about the other risks facing this business. To help with this, we’ve discovered 1 warning sign for KeyCorp that you should be aware of before investing in their shares.
If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.