Yahoo Finance Discover Financial Services (NYSE:DFS) Is Paying Out A Dividend Of $0.70
The board of Discover Financial Services (NYSE:DFS) has announced that it will pay a dividend of $0.70 per share on the 6th of June. Based on this payment, the dividend yield will be 2.2%, which is fairly typical for the industry.
Check out our latest analysis for Discover Financial Services
Discover Financial Services' Dividend Is Well Covered By Earnings
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, Discover Financial Services' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 66.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.
Discover Financial Services 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. The annual payment during the last 10 years was $0.80 in 2014, and the most recent fiscal year payment was $2.80. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
Dividend Growth May Be Hard To Achieve
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Discover Financial Services' EPS was effectively flat over the past five years, which could stop the company from paying more every year. If Discover Financial Services is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.
We Really Like Discover Financial Services' Dividend
Overall, we like to see the dividend staying consistent, and we think Discover Financial Services might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 2 warning signs for Discover Financial Services 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.
