PNC Financial Services Group (NYSE:PNC) Is Increasing Its Dividend To $1.70

The PNC Financial Services Group, Inc. (NYSE:PNC) will increase its dividend on the 5th of August to $1.70, which is 6.3% higher than last year's payment from the same period of $1.60. The payment will take the dividend yield to 3.3%, which is in line with the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that PNC Financial Services Group's stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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PNC Financial Services Group's Payment Expected To Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much.

PNC Financial Services Group 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 PNC Financial Services Group's payout ratio of 45% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 34.1%. Analysts estimate the future payout ratio will be 41% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for PNC Financial Services Group

PNC Financial Services Group Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $1.92 in 2015, and the most recent fiscal year payment was $6.40. 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.

PNC Financial Services Group Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. PNC Financial Services Group has impressed us by growing EPS at 9.7% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like PNC Financial Services Group's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for PNC Financial Services Group that you should be aware of before investing. 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.