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

The board of Cullen/Frost Bankers, Inc. (NYSE:CFR) has announced that the dividend on 15th of September will be increased to $0.87, which will be 16% higher than last year's payment of $0.75 which covered the same period. This takes the annual payment to 2.3% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Cullen/Frost Bankers

Cullen/Frost Bankers' Payment Expected To Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Cullen/Frost Bankers has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Cullen/Frost Bankers' payout ratio of 46% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 58.9% over the next 3 years. Analysts estimate the future payout ratio will be 39% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Cullen/Frost Bankers Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $1.84 in 2012 to the most recent total annual payment of $3.00. This implies that the company grew its distributions at a yearly rate of about 5.0% over that duration. 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.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings has been rising at 4.9% per annum over the last five years, which admittedly is a bit slow. The company has been growing at a pretty soft 4.9% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

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. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 12 Cullen/Frost Bankers analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.