Stock Analysis

Read This Before Considering The PNC Financial Services Group, Inc. (NYSE:PNC) For Its Upcoming US$1.15 Dividend

  •  Updated
Source: Shutterstock

The PNC Financial Services Group, Inc. (NYSE:PNC) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 15th of January, you won't be eligible to receive this dividend, when it is paid on the 5th of February.

PNC Financial Services Group's upcoming dividend is US$1.15 a share, following on from the last 12 months, when the company distributed a total of US$4.60 per share to shareholders. Based on the last year's worth of payments, PNC Financial Services Group stock has a trailing yield of around 2.9% on the current share price of $158.19. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether PNC Financial Services Group can afford its dividend, and if the dividend could grow.

Check out our latest analysis for PNC Financial Services Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. PNC Financial Services Group paid out 62% of its earnings to investors last year, a normal payout level for most businesses.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

NYSE:PNC Historic Dividend January 10th 2021

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're not enthused to see that PNC Financial Services Group's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, PNC Financial Services Group has lifted its dividend by approximately 28% a year on average.

The Bottom Line

Should investors buy PNC Financial Services Group for the upcoming dividend? PNC Financial Services Group has been struggling to generate growth while also paying out more than half of its earnings to shareholders as dividends. It doesn't appear an outstanding opportunity, but could be worth a closer look.

With that being said, if dividends aren't your biggest concern with PNC Financial Services Group, you should know about the other risks facing this business. For example, PNC Financial Services Group has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

When trading PNC Financial Services Group or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

Valuation is complex, but we're helping make it simple.

Find out whether PNC Financial Services Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis