Have you been keeping an eye on First Horizon National Corporation’s (NYSE:FHN) upcoming dividend of US$0.14 per share payable on the 01 April 2019? Then you only have 4 days left before the stock starts trading ex-dividend on the 14 March 2019. Is this future income a persuasive enough catalyst for investors to think about First Horizon National as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has it increased its dividend per share amount over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How well does First Horizon National fit our criteria?
The current trailing twelve-month payout ratio for the stock is 29%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 39% which, assuming the share price stays the same, leads to a dividend yield of 3.9%. However, EPS is forecasted to fall to $1.5 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider First Horizon National as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, First Horizon National produces a yield of 3.8%, which is high for Banks stocks.
With this in mind, I definitely rank First Horizon National 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, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three essential aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for FHN’s future growth? Take a look at our free research report of analyst consensus for FHN’s outlook.
- Valuation: What is FHN 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 FHN 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.