Discover Financial Services (NYSE:DFS): Ex-Dividend Is In 3 Days, Should You Buy?

If you are interested in cashing in on Discover Financial Services's (NYSE:DFS) upcoming dividend of $0.35 per share, you only have 3 days left to buy the shares before its ex-dividend date, 23 May 2018, in time for dividends payable on the 07 June 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Discover Financial Services's latest financial data to analyse its dividend attributes. View our latest analysis for Discover Financial Services

Here's how I find good dividend stocks

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

• Is their annual yield among the top 25% of dividend payers?
• Does it consistently pay out dividends without missing a payment of significantly cutting payout?
• Has it increased its dividend per share amount over the past?
• Can it afford to pay the current rate of dividends from its earnings?
• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

How well does Discover Financial Services fit our criteria?

The company currently pays out 23.26% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 18.63%, leading to a dividend yield of around 2.03%. However, EPS should increase to $7.93, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you're eyeing out is reliable in its payments. Although DFS's per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again. Compared to its peers, Discover Financial Services has a yield of 1.81%, which is high for Consumer Finance stocks but still below the market's top dividend payers.

Next Steps:

With this in mind, I definitely rank Discover Financial Services 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, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company's fundamentals and underlying business before making an investment decision. There are three essential factors you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for DFS’s future growth? Take a look at our free research report of analyst consensus for DFS’s outlook.
2. Valuation: What is DFS 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 DFS is currently mispriced by the market.
3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.