Raymond James Financial, Inc.'s (NYSE:RJF) dividend will be increasing from last year's payment of the same period to $0.42 on 17th of April. Even though the dividend went up, the yield is still quite low at only 1.6%.
Raymond James Financial's Earnings Easily Cover The Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. Raymond James Financial is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
The next year is set to see EPS grow by 48.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 16% by next year, which is in a pretty sustainable range.
Raymond James Financial Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $0.347, compared to the most recent full-year payment of $1.68. This means that it has been growing its distributions at 17% per annum over that time. 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 21% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
Overall, we always like to see the dividend being raised, but we don't think Raymond James Financial will make a great income stock. While Raymond James Financial is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for Raymond James Financial that investors need to be conscious of moving forward. 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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