State Street (NYSE:STT) Is Increasing Its Dividend To $0.84

The board of State Street Corporation (NYSE:STT) has announced that it will be paying its dividend of $0.84 on the 14th of October, an increased payment from last year's comparable dividend. This takes the dividend yield to 3.0%, which shareholders will be pleased with.

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State Street's Earnings Will Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much.

State Street has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 34%, which means that State Street would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 36.7% over the next 3 years. Analysts estimate the future payout ratio will be 31% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for State Street

State Street Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $1.20 in 2015, and the most recent fiscal year payment was $3.36. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

State Street Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that State Street has been growing its earnings per share at 8.1% a year over the past five years. State Street definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like State Street's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for State Street that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.