PRU

Prudential Financial, Inc.

87.18
USD
-0.18%
87.18
USD
-0.18%
86.18 124.22
52 weeks
52 weeks

Mkt Cap 33.65B

Shares Out 386.00M

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Don't Buy Prudential Financial, Inc. (NYSE:PRU) For Its Next Dividend Without Doing These Checks

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Prudential Financial, Inc. (NYSE:PRU) is about to go ex-dividend in just 2 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Prudential Financial's shares before the 22nd of August in order to receive the dividend, which the company will pay on the 15th of September. The company's next dividend payment will be US$1.20 per share, and in the last 12 months, the company paid a total of US$4.80 per share. Calculating the last year's worth of payments shows that Prudential Financial has a trailing yield of 4.6% on the current share price of $105.42. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing. If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. It paid out 85% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline. When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn. Click here to see the company's payout ratio, plus analyst estimates of its future dividends. Have Earnings And Dividends Been Growing? Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Prudential Financial's earnings per share have dropped 11% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend. The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Prudential Financial has delivered 13% dividend growth per year on average over the past 10 years. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Prudential Financial is already paying out 85% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future. To Sum It Up Has Prudential Financial got what it takes to maintain its dividend payments? We're not overly enthused to see Prudential Financial's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend. Although, if you're still interested in Prudential Financial and want to know more, you'll find it very useful to know what risks this stock faces. Our analysis shows 2 warning signs for Prudential Financial and you should be aware of them before buying any shares. Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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