State Street Corporation (NYSE:STT) will increase its dividend from last year's comparable payment on the 13th of October to $0.63. This takes the dividend yield to 3.7%, which shareholders will be pleased with.
State Street's Payment Expected To Have Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much.
State Street has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 31%, 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 32.2% over the next 3 years. The future payout ratio could be 31% over that time period, according to analyst estimates, which is a good look for the future of the dividend.
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 $0.72 in 2012, and the most recent fiscal year payment was $2.52. This means that it has been growing its distributions at 13% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
We Could See State Street's Dividend Growing
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that State Street has been growing its earnings per share at 5.6% 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
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for State Street that investors need to be conscious of moving forward. 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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