The board of KeyCorp (NYSE:KEY) has announced that it will pay a dividend on the 15th of June, with investors receiving $0.205 per share. This means the annual payment is 9.1% of the current stock price, which is above the average for the industry.
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. KeyCorp's stock price has reduced by 53% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.
KeyCorp's Earnings Will Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much.
KeyCorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on KeyCorp's last earnings report, the payout ratio is at a decent 45%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Over the next 3 years, EPS is forecast to expand by 7.9%. Analysts forecast the future payout ratio could be 44% over the same time horizon, which is a number we think the company can maintain.
KeyCorp 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 2013, the annual payment back then was $0.20, compared to the most recent full-year payment of $0.82. This works out to be a compound annual growth rate (CAGR) of approximately 15% 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 Has Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that KeyCorp has grown earnings per share at 7.3% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
We Really Like KeyCorp's Dividend
Overall, we like to see the dividend staying consistent, and we think KeyCorp might even raise payments in the future. 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. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for KeyCorp that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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