JPMorgan Chase (NYSE:JPM) Is Increasing Its Dividend To $1.05

The board of JPMorgan Chase & Co. (NYSE:JPM) has announced that it will be increasing its dividend by 5.0% on the 31st of October to $1.05, up from last year's comparable payment of $1.00. Despite this raise, the dividend yield of 2.7% is only a modest boost to shareholder returns.

See our latest analysis for JPMorgan Chase

JPMorgan Chase's Dividend Forecasted To Be Well Covered By Earnings

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

JPMorgan Chase has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on JPMorgan Chase's last earnings report, the payout ratio is at a decent 26%, meaning that the company is able to pay out its dividend with a bit of room to spare.

EPS is set to fall by 7.7% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 33% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

JPMorgan Chase Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the dividend has gone from $1.20 total annually to $4.00. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. JPMorgan Chase has seen EPS rising for the last five years, at 16% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for JPMorgan Chase's prospects of growing its dividend payments in the future.

JPMorgan Chase Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that JPMorgan Chase is a strong income stock thanks to its track record and growing earnings. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for JPMorgan Chase you should be aware of, and 1 of them makes us a bit uncomfortable. 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.