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Attention dividend hunters! Provident Financial Services Inc (NYSE:PFS) will be distributing its dividend of $0.2 per share on the 28 February 2018, and will start trading ex-dividend in 3 days time on the 14 February 2018. What does this mean for current shareholders and potential investors? Below, I will explain how holding Provident Financial Services can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes. Check out our latest analysis for Provident Financial Services
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Does it pay an annual yield higher than 75% of dividend payers?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has dividend per share amount increased over the past?
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Is its earnings sufficient to payout dividend at the current rate?
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Will it have the ability to keep paying its dividends going forward?
How well does Provident Financial Services fit our criteria?
The company currently pays out 53.46% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. However, going forward, analysts expect PFS’s payout to fall to 46.51% of its earnings, which leads to a dividend yield of around 3.41%. However, EPS should increase to $1.84, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of PFS it has increased its DPS from $0.44 to $0.8 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock. In terms of its peers, Provident Financial Services has a yield of 3.11%, which is high for Mortgage stocks but still below the market’s top dividend payers.
Next Steps:
Taking into account the dividend metrics, Provident Financial Services ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three key factors you should look at:
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1. Future Outlook: What are well-informed industry analysts predicting for PFS’s future growth? Take a look at our free research report of analyst consensus for PFS’s outlook.
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2. Valuation: What is PFS worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether PFS is currently mispriced by the market.
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3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.