There is a lot to be liked about F.N.B. Corporation (NYSE:FNB) as an income stock. It has paid dividends over the past 10 years. The company is currently worth US$3.7b, and now yields roughly 4.1%. Does F.N.B tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share risen in the past couple of years?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
Does F.N.B pass our checks?
The company currently pays out 43% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect FNB’s payout to remain around the same level at 40% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 4.2%. Moreover, EPS should increase to $1.17.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. FNB investors will be well aware the dividend payments are lower today than they were 10 years ago, although the payments have at least been steady. However, income investors that value stability over growth may still find FNB appealing.
Relative to peers, F.N.B has a yield of 4.1%, which is high for Banks stocks.
With this in mind, I definitely rank F.N.B 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. There are three essential aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for FNB’s future growth? Take a look at our free research report of analyst consensus for FNB’s outlook.
- Valuation: What is FNB 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 FNB 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.