In This Article:
The board of Truist Financial Corporation (NYSE:TFC) has announced that it will pay a dividend of $0.52 per share on the 2nd of June. This makes the dividend yield 5.3%, which will augment investor returns quite nicely.
Truist Financial's Payment Expected To Have Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained.
Having distributed dividends for at least 10 years, Truist Financial has a long history of paying out a part of its earnings to shareholders. Despite this history however, the company's latest earnings report actually shows that it didn't have enough earnings to cover its dividends. This is an alarming sign that could mean that Truist Financial's dividend at its current rate may no longer be sustainable for longer.
Over the next 3 years, EPS is forecast to expand by 174.4%. The future payout ratio could be 49% over that time period, according to analyst estimates, which is a good look for the future of the dividend.
View our latest analysis for Truist Financial
Truist Financial Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.96 in 2015 to the most recent total annual payment of $2.08. This means that it has been growing its distributions at 8.0% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
Dividend Growth Potential Is Shaky
The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 37% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
The Dividend Could Prove To Be Unreliable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would be a touch cautious of relying on this stock primarily for the dividend income.