State Street Corporation's (NYSE:STT) investors are due to receive a payment of $0.69 per share on 11th of July. This will take the dividend yield to an attractive 3.7%, providing a nice boost to shareholder returns.
View our latest analysis for State Street
State Street's Earnings Will Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.
State Street has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but State Street's payout ratio of 49% is a good sign as this means that earnings decently cover dividends.
Over the next 3 years, EPS is forecast to expand by 71.4%. The future payout ratio could be 32% over that time period, according to analyst estimates, which is a good look for the future of the dividend.
State Street Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from $1.04 total annually to $2.76. This implies that the company grew its distributions at a yearly rate of about 10% 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's Growth Prospects Are Limited
The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Unfortunately, State Street's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
In Summary
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for State Street that investors should take into consideration. 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.
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About NYSE:STT
State Street
Through its subsidiaries, provides a range of financial products and services to institutional investors worldwide.
Undervalued with excellent balance sheet and pays a dividend.
