Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that The Charles Schwab Corporation (NYSE:SCHW) is about to go ex-dividend in just 4 days. If you purchase the stock on or after the 13th of February, you won’t be eligible to receive this dividend, when it is paid on the 28th of February.
Charles Schwab’s upcoming dividend is US$0.18 a share, following on from the last 12 months, when the company distributed a total of US$0.72 per share to shareholders. Last year’s total dividend payments show that Charles Schwab has a trailing yield of 1.5% on the current share price of $47.31. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Charles Schwab has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Charles Schwab’s payout ratio is modest, at just 25% of profit.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That’s why it’s comforting to see Charles Schwab’s earnings have been skyrocketing, up 23% per annum for the past five years.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the past ten years, Charles Schwab has increased its dividend at approximately 12% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Is Charles Schwab worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, Charles Schwab looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Curious what other investors think of Charles Schwab? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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.
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