State Street's (NYSE:STT) Dividend Will Be Increased To $0.69

State Street Corporation (NYSE:STT) will increase its dividend from last year's comparable payment on the 12th of October to $0.69. This will take the annual payment to 3.9% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for State Street

State Street's Payment Expected To Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

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.

Over the next 3 years, EPS is forecast to expand by 9.7%. Analysts forecast the future payout ratio could be 36% over the same time horizon, which is a number we think the company can maintain.

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 $0.96 in 2013 to the most recent total annual payment of $2.76. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

State Street Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that State Street has grown earnings per share at 6.0% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

State Street Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that State Street is a strong income stock thanks to its track record and growing earnings. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for State Street that you should be aware of before investing. Is State Street 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.