PNC Financial Services Boosts Quarterly Dividend 27% (PNC)
By: Ned Piplovic,
PNC Financial Services Group, Inc. (NYSE:PNC) continued its seven-year streak of consecutive dividend boosts with a 27% quarterly dividend hike for its upcoming dividend distribution in early August 2018.
The company cut its quarterly dividend only once over the past two decades. In addition to an 85% cut to its quarterly dividend payout from $0.66 in the first quarter of 2009 to $0.10 in the following period, the company also failed to raise its annual dividend twice when it paid the same annual dividend in 2002 and 2005 as it did in the years immediately preceding those two years.
During the past two decades, the company has boosted its annual dividend 85% of the time. While interrupting its multi-year share-price uptrend and declining since early March 2018, the stock still managed to deliver asset appreciation of more than 7% over the past year.
However, the current decline is somewhat atypical for the stock over the past decade, which saw its share price increase nearly five-fold since the 2008 financial crisis. Investors convinced that the current share price decline might be just a temporary pullback before a bounce back should not delay doing their research. Taking a long position before the company’s next ex-dividend date on July 16 will ensure eligibility for the next payout on Aug. 6.
PNC Financial Services Group, Inc. (NYSE:PNC)
Headquartered in Pittsburgh, Pennsylvania, and founded in 1922, PNC Financial Services Group, Inc. operates as a diversified financial services company through four segments – Retail Banking, Corporate & Institutional Banking, Asset Management Group and BlackRock. The Retail Banking segment offers deposit, lending and brokerage services, as well as investment and cash management services to individual consumers and small business customers. As of March 31, 2018, this segment operated a network of approximately 2,400 branches and 9,000 automated teller machines (ATMs). The Corporate & Institutional Banking segment provides loans, cash and investment management, receivables management, merger and acquisition advisory, foreign exchange and other services. Additionally, the Asset Management Group segment provides investment and retirement planning, customized investment management and private banking, as well as credit and trust management and estate planning. Lastly, the PNC Group holds a minority ownership stake in the investment management firm BlackRock (NYSE:BLK), which offers investment and risk management services to institutional and retail clients.
The share price started the trailing 12 months with a minor sell-off of just 4.3%, which was within the limits of the stock’s moderate volatility over the past several years. After dipping to its 52-week low of $120.71 on September 7, 2017, the share price reverted to its rising uptrend with a similar level of volatility and gained nearly 35% before topping out at the 52-week high of $162.45 on March 9, 2018. After peaking in early March, the share price declined more than 16% and closed on July 5 at $135.58. While considerably below the March peak, this share price was 7.5% higher than it was one year earlier, 12.3% above the 52-week low from September 2017 and more than 80% above its price level from five years earlier.
PNC’s upcoming quarterly dividend payout of $0.95 is 26.6% above the $0.75 quarterly amount from the dividend distributed in the previous quarter. This new quarterly dividend distribution corresponds to a $3.80 annual dividend payout – the company’s highest dividend payout ever –and is equivalent to a 2.8% forward dividend yield. While slightly below the 3.04% average yield of the entire Financials sector, PNC’s current 2.8% yield is more than 36% above the 2.06% simple average yield of all the companies in the Money Center Banks industry segment and even 5.4% higher than that segment’s only dividend-paying companies.
Even with missed annual dividend boosts and a large dividend cut, PNC enhanced its annual dividend 140% over the past 20 years, which is equivalent to a 4.5% annual dividend growth rate. However, the extraordinary dividend growth occurred after the 2009 dividend cut. Since 2010, the annual dividend amount advanced at an average annual rate of nearly 77% and resulted in a 95-fold total annual increase. Even disregarding the extremely low 2010 dividend payout, the company enhanced its total annual dividend 230% since 2011, which corresponds to an 18.6% average annual growth rate over the past seven years.
The share-price decline since early March 2018 limited the shareholders total return over the past 12 months to 9%. However, over the past three years, the shareholders enjoyed a 46% total return and nearly doubled their investment over the past five years with a total return of 96%.
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