Cullen/Frost Bankers (NYSE:CFR) Is Increasing Its Dividend To $0.92

The board of Cullen/Frost Bankers, Inc. (NYSE:CFR) has announced that it will be paying its dividend of $0.92 on the 15th of September, an increased payment from last year's comparable dividend. This takes the annual payment to 3.8% of the current stock price, which is about average for the industry.

View our latest analysis for Cullen/Frost Bankers

Cullen/Frost Bankers' Earnings Will Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Having distributed dividends for at least 10 years, Cullen/Frost Bankers has a long history of paying out a part of its earnings to shareholders. Based on Cullen/Frost Bankers' last earnings report, the payout ratio is at a decent 33%, meaning that the company is able to pay out its dividend with a bit of room to spare.

EPS is set to fall by 18.2% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 44% over the same time period, which we think the company can easily maintain.

Cullen/Frost Bankers Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was $1.92, compared to the most recent full-year payment of $3.68. This means that it has been growing its distributions at 6.7% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Cullen/Frost Bankers has been growing its earnings per share at 11% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Cullen/Frost Bankers' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Cullen/Frost Bankers that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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