Should Income Investors Buy Prudential plc (LON:PRU) Before Its Ex-Dividend?

Investors who want to cash in on Prudential plc’s (LON:PRU) upcoming dividend of UK£0.16 per share have only 2 days left to buy the shares before its ex-dividend date, 23 August 2018, in time for dividends payable on the 27 September 2018. What does this mean for current shareholders and potential investors? Below, I will explain how holding Prudential can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.

View our latest analysis for Prudential

How I analyze a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

  • Is it paying an annual yield above 75% of dividend payers?
  • Has it paid dividend every year without dramatically reducing payout in the past?
  • Has dividend per share risen in the past couple of years?
  • Is is able to pay the current rate of dividends from its earnings?
  • Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
LSE:PRU Historical Dividend Yield August 20th 18
LSE:PRU Historical Dividend Yield August 20th 18

Does Prudential pass our checks?

The company currently pays out 55.31% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently 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.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. PRU has increased its DPS from £0.18 to £0.47 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes PRU a true dividend rockstar.

In terms of its peers, Prudential generates a yield of 2.73%, which is on the low-side for Insurance stocks.

Next Steps:

Considering the dividend attributes we analyzed above, Prudential is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three important factors you should further examine:

  1. 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.
  2. 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.
  3. 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.