Over the past 10 years Prudential plc (LON:PRU) has returned an average of 3.00% per year from dividend payouts. The company is currently worth UK£45.10b, and now yields roughly 2.67%. Should it have a place in your portfolio? Let’s take a look at Prudential in more detail.
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it the top 25% annual dividend yield payer?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share risen in the past couple of years?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it have the ability to keep paying its dividends going forward?
How does Prudential fare?
The current trailing twelve-month payout ratio for the stock is 50.50%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 33.39%, leading to a dividend yield of 3.22%. However, EPS should increase to £1.39, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. PRU has increased its DPS from £0.18 to £0.47 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes PRU a true dividend rockstar.
Compared to its peers, Prudential generates a yield of 2.67%, which is on the low-side for Insurance stocks.
Taking into account the dividend metrics, Prudential ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three key factors you should look at:
- 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.
- 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.
- 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 email@example.com.