Prudential Financial, Inc.'s (NYSE:PRU) dividend will be increasing from last year's payment of the same period to $1.35 on 13th of March. This will take the annual payment to 4.8% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Prudential Financial

Prudential Financial's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Prudential Financial's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 66.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 45% by next year, which is in a pretty sustainable range.

Prudential Financial Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was $2.12, compared to the most recent full-year payment of $5.40. This means that it has been growing its distributions at 9.8% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth Is Doubtful

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. It's not great to see that Prudential Financial's earnings per share has fallen at approximately 5.8% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On Prudential Financial's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. See if the 10 analysts are forecasting a turnaround in our free collection of analyst estimates here. 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.