Stock Analysis

Charles Schwab (NYSE:SCHW) Is Paying Out A Larger Dividend Than Last Year

  •  Updated
NYSE:SCHW
Source: Shutterstock

The Charles Schwab Corporation (NYSE:SCHW) has announced that it will be increasing its dividend from last year's comparable payment on the 26th of August to $0.22. Despite this raise, the dividend yield of 1.3% is only a modest boost to shareholder returns.

Check out our latest analysis for Charles Schwab

Charles Schwab's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, Charles Schwab's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 70.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 18% by next year, which is in a pretty sustainable range.

historic-dividend
NYSE:SCHW Historic Dividend August 10th 2022

Charles Schwab Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.24 in 2012 to the most recent total annual payment of $0.88. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Charles Schwab has grown earnings per share at 15% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Charles Schwab's prospects of growing its dividend payments in the future.

Charles Schwab Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Charles Schwab that you should be aware of before investing. Is Charles Schwab not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

What are the risks and opportunities for Charles Schwab?

The Charles Schwab Corporation, together with its subsidiaries, provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services.

View Full Analysis

Rewards

  • Trading at 7.6% below our estimate of its fair value

  • Earnings are forecast to grow 15.15% per year

  • Earnings grew by 26.2% over the past year

Risks

  • Significant insider selling over the past 3 months

View all Risks and Rewards

Share Price

Market Cap

1Y Return

View Company Report

About NYSE:SCHW

Charles Schwab

The Charles Schwab Corporation, together with its subsidiaries, provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation2
Future Growth4
Past Performance5
Financial Health3
Dividends4

Read more about these checks in the individual report sections or in our analysis model.

Solid track record with reasonable growth potential and pays a dividend.