Raymond James Financial's (NYSE:RJF) Shareholders Will Receive A Bigger Dividend Than Last Year

Raymond James Financial, Inc. (NYSE:RJF) has announced that it will be increasing its dividend from last year's comparable payment on the 17th of April to $0.42. Despite this raise, the dividend yield of 1.6% is only a modest boost to shareholder returns.

See our latest analysis for Raymond James Financial

Raymond James Financial's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Raymond James Financial is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise by 48.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 16%, which is in the range that makes us comfortable with the sustainability of the dividend.

Raymond James Financial Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from $0.347 total annually to $1.68. This means that it has been growing its distributions at 17% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Raymond James Financial has been growing its earnings per share at 21% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On Raymond James Financial's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Raymond James Financial is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Raymond James Financial that investors need to be conscious of moving forward. Is Raymond James Financial not quite the opportunity you were looking for? Why not check out our selection of top 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.