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There is a lot to be liked about Provident Financial Services, Inc. (NYSE:PFS) as an income stock. It has paid dividends over the past 10 years. The stock currently pays out a dividend yield of 3.3%, and has a market cap of US$1.8b. Let’s dig deeper into whether Provident Financial Services should have a place in your portfolio.
Here’s how I find good dividend stocks
If you are a dividend investor, you should always assess these five key metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has it increased its dividend per share amount over the past?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
How well does Provident Financial Services fit our criteria?
Provident Financial Services has a trailing twelve-month payout ratio of 45%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 60% which, assuming the share price stays the same, leads to a dividend yield of around 4.2%. In addition to this, EPS should increase to $1.91. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider 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.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of PFS it has increased its DPS from $0.44 to $0.92 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes PFS a true dividend rockstar.
Compared to its peers, Provident Financial Services produces a yield of 3.3%, which is high for Mortgage stocks but still below the market’s top dividend payers.
Considering the dividend attributes we analyzed above, Provident Financial Services is definitely worth keeping an eye on for someone looking to build a dedicated income 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 fundamental factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for PFS’s future growth? Take a look at our free research report of analyst consensus for PFS’s outlook.
- Valuation: What is PFS 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 PFS 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.