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Raymond James Financial, Inc. (NYSE:RJF) will increase its dividend on the 16th of January to $0.50, which is 11% higher than last year's payment from the same period of $0.45. Even though the dividend went up, the yield is still quite low at only 1.1%.
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 Raymond James Financial's stock price has increased by 42% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
See our latest analysis for Raymond James Financial
Raymond James Financial's Future Dividend Projections Appear Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Raymond James Financial was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to expand by 19.1%. 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.
Raymond James Financial Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.427 in 2014, and the most recent fiscal year payment was $1.80. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
The Dividend Looks Likely To Grow
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 Raymond James Financial has been growing its earnings per share at 16% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
We Really Like Raymond James Financial's Dividend
Overall, a dividend increase is always good, and we think that Raymond James Financial is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.