Cullen/Frost Bankers' (NYSE:CFR) Shareholders Will Receive A Bigger Dividend Than Last Year

Cullen/Frost Bankers, Inc. (NYSE:CFR) will increase its dividend from last year's comparable payment on the 15th of December to $0.92. Based on this payment, the dividend yield for the company will be 4.1%, which is fairly typical for the industry.

View our latest analysis for Cullen/Frost Bankers

Cullen/Frost Bankers' Dividend Forecasted To Be Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time.

Cullen/Frost Bankers has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 34%, which means that Cullen/Frost Bankers would be able to pay its last dividend without pressure on the balance sheet.

Over the next 3 years, EPS is forecast to fall by 16.5%. Despite that, analysts estimate the future payout ratio could be 44% over the same time period, which is in a pretty comfortable range.

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. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Cullen/Frost Bankers Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Cullen/Frost Bankers has impressed us by growing EPS at 9.5% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Cullen/Frost Bankers' Dividend

Overall, a dividend increase is always good, and we think that Cullen/Frost Bankers is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. 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. If you are a dividend investor, you might also want to look at our curated list of high yield 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.