Cullen/Frost Bankers' (NYSE:CFR) Upcoming Dividend Will Be Larger Than Last Year's

By
Simply Wall St
Published
August 05, 2021
NYSE:CFR
Source: Shutterstock

The board of Cullen/Frost Bankers, Inc. (NYSE:CFR) has announced that it will be increasing its dividend on the 15th of September to US$0.75. Based on the announced payment, the dividend yield for the company will be 2.6%, which is fairly typical for the industry.

See our latest analysis for Cullen/Frost Bankers

Cullen/Frost Bankers' Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Cullen/Frost Bankers' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to fall by 7.0% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 51%, which we are pretty comfortable with and we think is feasible on an earnings basis.

historic-dividend
NYSE:CFR Historic Dividend August 5th 2021

Cullen/Frost Bankers Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2011, the first annual payment was US$1.80, compared to the most recent full-year payment of US$3.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see Cullen/Frost Bankers has been growing its earnings per share at 8.7% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Cullen/Frost Bankers Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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. We have also put together a list of global stocks with a solid dividend.

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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. 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.
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