Principal Financial Group (NASDAQ:PFG) Will Pay A Dividend Of $0.64

Principal Financial Group, Inc. (NASDAQ:PFG) has announced that it will pay a dividend of $0.64 per share on the 19th of December. This means the annual payment is 2.9% of the current stock price, which is above the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Principal Financial Group's stock price has increased by 33% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Our analysis indicates that PFG is potentially undervalued!

Principal Financial Group's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Principal Financial Group's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to fall by 53.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 34%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Principal Financial Group Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.72 in 2012, and the most recent fiscal year payment was $2.56. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Principal Financial Group has been growing its earnings per share at 31% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Principal Financial Group's Dividend

Overall, we like to see the dividend staying consistent, and we think Principal Financial Group might even raise payments in the future. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Principal Financial Group you should be aware of, and 1 of them makes us a bit uncomfortable. 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.