People’s United Financial, Inc. (NASDAQ:PBCT) has pleased shareholders over the past 10 years, by paying out dividends. The company currently pays out a dividend yield of 4.0% to shareholders, making it a relatively attractive dividend stock. Should it have a place in your portfolio? Let’s take a look at People’s United Financial in more detail.
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it have the ability to keep paying its dividends going forward?
How well does People’s United Financial fit our criteria?
People’s United Financial has a trailing twelve-month payout ratio of 54%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect PBCT’s payout to fall to 47% of its earnings. Assuming a constant share price, this equates to a dividend yield of 4.1%. However, EPS should increase to $1.38, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. PBCT has increased its DPS from $0.60 to $0.70 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, People’s United Financial has a yield of 4.0%, which is high for Banks stocks.
With this in mind, I definitely rank People’s United Financial as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their 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. There are three key aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for PBCT’s future growth? Take a look at our free research report of analyst consensus for PBCT’s outlook.
- Valuation: What is PBCT 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 PBCT 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Thank you for reading.