Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Principal Financial Group, Inc. (NASDAQ:PFG) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 31st of August, you won't be eligible to receive this dividend, when it is paid on the 25th of September.
Principal Financial Group's next dividend payment will be US$0.56 per share. Last year, in total, the company distributed US$2.24 to shareholders. Based on the last year's worth of payments, Principal Financial Group stock has a trailing yield of around 5.1% on the current share price of $44.31. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Principal Financial Group can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Principal Financial Group's payout ratio is modest, at just 49% of profit.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Principal Financial Group, with earnings per share up 4.3% on average over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Principal Financial Group has increased its dividend at approximately 16% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
From a dividend perspective, should investors buy or avoid Principal Financial Group? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Overall, Principal Financial Group looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Curious what other investors think of Principal Financial Group? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.