Re: Recent Dividend Increase - Part 5 PRU (currently owned)
Prudential Financial (PRU).
Prudential just increased its dividend by 4.2%. The smallest dividend increase I’m featuring today, but here’s the thing: When you own a diversified portfolio of high-quality dividend growth stocks, things tend to average out nicely. You might get some small dividend raises here and there, but then those big, double-digit dividend raises will come in and boost the overall average.
The global insurance and investment management company has now increased its dividend for 15 consecutive years. This name works really well for income-oriented dividend growth investors. That’s because the stock yields 5.1%.
That’s about three times higher than the broader market’s yield. It’s well into the territory of income vehicles, like, say, REITs. On the other hand, the last few dividend raises have been in this mid-single-digit range. And that’s a pretty reasonable expectation on a go-forward basis. The payout ratio is 52.9%, based on FY 2022 adjusted EPS, indicating more of the status quo.
To my eye, this stock looks fairly valued. We put out a full analysis and valuation video on the business back in late October, where the estimate of intrinsic value came out to $102.60/share. Notably, my dividend discount model analysis in that video estimated a long-term dividend growth rate of 5%, so we’re roughly on pace here.
With the stock currently trading hands for about $99, I think we’re basically sitting at fair value. Still, if you’re in the market for a 5%+ yield, and you’re okay with that dividend growing at a mid-single-digit rate per year, Prudential is worth a closer look.
— Jason Fieber |
