Charles Schwab (NYSE:SCHW) has announced that it will increase its dividend to $0.20
The Charles Schwab Company (NYSE: SCHW) the dividend will increase to $0.20 on February 25. Despite this increase, the dividend yield of 0.8% is only a modest increase in shareholder return.
See our latest analysis for Charles Schwab
Charles Schwab’s income easily covers distributions
It would be nice if the yield was higher, but we should also check whether higher levels of dividend payments would be sustainable. However, Charles Schwab’s earnings easily cover the dividend. As a result, much of what he earned was plowed back into the business.
Next year is expected to see EPS increase by 24.3%. Assuming the dividend continues on recent trends, we think the payout ratio could be 25% by next year, which is in a fairly sustainable range.
Charles Schwab has a solid track record
The company has a long history of paying stable dividends. Since 2012, the dividend has increased from US$0.24 to US$0.80. This corresponds to a compound annual growth rate (CAGR) of approximately 13% per year during this period. So, dividends grew quite quickly and, more impressively, they didn’t see any noticeable declines during this period.
The dividend should increase
Investors might be drawn to the stock because of the quality of its payment history. We are encouraged to see that Charles Schwab has increased earnings per share by 17% per year over the past five years. EPS growth bodes well for the dividend, as does the low payout ratio the company is currently reporting.
We really like the Charles Schwab dividend
Overall, a dividend increase is always good, and we think Charles Schwab is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also converted into cash flow. Overall, this checks a lot of the boxes we look for when choosing an income stock.
It is important to note that companies with a consistent dividend policy will generate greater investor confidence than those with an erratic policy. At the same time, there are other factors that our readers should be aware of before investing capital in a stock. Pushing the debate a little further, we have identified 1 warning sign for Charles Schwab that investors should be aware of going forward. Looking for more high yield dividend ideas? Try our curated list of strong dividend payers.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.