There's A Lot To Like About Prudential's (LON:PRU) Upcoming US$0.1629 Dividend

Prudential plc (LON:PRU) stock is about to trade ex-dividend in three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Prudential investors that purchase the stock on or after the 27th of March will not receive the dividend, which will be paid on the 14th of May.

The company's next dividend payment will be US$0.1629 per share, and in the last 12 months, the company paid a total of US$0.23 per share. Based on the last year's worth of payments, Prudential has a trailing yield of 2.2% on the current stock price of UK£7.982. If you buy this business for its dividend, you should have an idea of whether Prudential's dividend is reliable and sustainable. So we need to investigate whether Prudential can afford its dividend, and if the dividend could grow.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Prudential paid out a comfortable 27% of its profit last year.

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.

Check out our latest analysis for Prudential

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. With that in mind, we're encouraged by the steady growth at Prudential, with earnings per share up 3.1% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Prudential's dividend payments per share have declined at 7.6% per year on average over the past 10 years, which is uninspiring. Prudential is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

Is Prudential worth buying for its dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, Prudential appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

Curious what other investors think of Prudential? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.