Assessing the Sustainability and Growth of U.S. Bancorp's Dividends
U.S. Bancorp (USB, Financial) recently announced a dividend of $0.49 per share, payable on 2024-01-16, with the ex-dividend date set for 2023-12-28. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into U.S. Bancorp's dividend performance and assess its sustainability.
What Does U.S. Bancorp Do?
As a diversified financial-services provider, U.S. Bancorp is one of the nation's largest regional banks, with branches in roughly 26 states, primarily in the Western and Midwestern United States. The bank offers many services, including retail banking, commercial banking, trust and wealth services, credit cards, mortgages, and other payments capabilities.
A Glimpse at U.S. Bancorp's Dividend History
U.S. Bancorp has maintained a consistent dividend payment record since 1984. Dividends are currently distributed on a quarterly basis. U.S. Bancorp has increased its dividend each year since 2009. The stock is thus listed as a dividend achiever, an honor that is given to companies that have increased their dividend each year for at least the past 14 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down U.S. Bancorp's Dividend Yield and Growth
As of today, U.S. Bancorp currently has a 12-month trailing dividend yield of 4.37% and a 12-month forward dividend yield of 4.46%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, U.S. Bancorp's annual dividend growth rate was 6.00%. Extended to a five-year horizon, this rate increased to 9.90% per year. And over the past decade, U.S. Bancorp's annual dividends per share growth rate stands at 9.50%.
Based on U.S. Bancorp's dividend yield and five-year growth rate, the 5-year yield on cost of U.S. Bancorp stock as of today is approximately 7.01%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, U.S. Bancorp's dividend payout ratio is 0.57.
U.S. Bancorp's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks U.S. Bancorp's profitability 6 out of 10 as of 2023-09-30, suggesting fair profitability. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. U.S. Bancorp's growth rank of 6 out of 10 suggests that the company has a fair growth outlook.
Revenue is the lifeblood of any company, and U.S. Bancorp's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. U.S. Bancorp's revenue has increased by approximately 3.90% per year on average, a rate that underperforms than approximately 64.26% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, U.S. Bancorp's earnings increased by approximately -2.40% per year on average, a rate that underperforms than approximately 81.8% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 2.30%, which underperforms than approximately 70.17% of global competitors.
Next Steps
In conclusion, while U.S. Bancorp has a long history of dividend consistency and growth, its current growth metrics and profitability suggest that the company may face challenges in sustaining its dividend growth rate in the long term. The dividend payout ratio indicates a balanced approach to shareholder returns and retained earnings, which is positive for future prospects. However, investors should be mindful of the company's underperformance in revenue and earnings growth compared to its global competitors. These factors should be weighed carefully when considering U.S. Bancorp's dividends as part of an investment strategy. Will U.S. Bancorp continue its dividend achiever status in the years to come? Investors may want to keep an eye on the company's future earnings reports and strategic initiatives for further clues.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
