The board of State Street Corporation (NYSE:STT) has announced that it will be paying its dividend of $0.76 on the 11th of October, an increased payment from last year's comparable dividend. This will take the annual payment to 3.5% of the stock price, which is above what most companies in the industry pay.
View our latest analysis for State Street
State Street's Earnings Will Easily Cover The Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.
Having distributed dividends for at least 10 years, State Street has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but State Street's payout ratio of 51% is a good sign as this means that earnings decently cover dividends.
The next 3 years are set to see EPS grow by 83.5%. The future payout ratio could be 31% 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
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $1.04 in 2014 to the most recent total annual payment of $3.04. This implies that the company grew its distributions at a yearly rate of about 11% 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.
State Street May Find It Hard To Grow The Dividend
The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. State Street hasn't seen much change in its earnings per share over the last five years.
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.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs 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.
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.
