Charles Schwab (NYSE:SCHW) Is Paying Out A Larger Dividend Than Last Year

The Charles Schwab Corporation's (NYSE:SCHW) dividend will be increasing from last year's payment of the same period to $0.22 on 26th of August. Despite this raise, the dividend yield of 1.3% is only a modest boost to shareholder returns.

Charles Schwab's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, Charles Schwab's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 70.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 18% by next year, which is in a pretty sustainable range.

Charles Schwab Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the annual payment back then was $0.24, compared to the most recent full-year payment of $0.88. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. 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.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Charles Schwab has seen EPS rising for the last five years, at 15% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Charles Schwab's prospects of growing its dividend payments in the future.

We Really Like Charles Schwab's Dividend

Overall, a dividend increase is always good, and we think that Charles Schwab is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Charles Schwab that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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