Every year, S&P Dow Jones Indices updates its list of Dividend Aristocrats, a group of stocks in the S&P 500 with 25+ consecutive years of dividend growth. On January 24, four companies were added to the list,  People’s United Financial, Inc. (PBCT), was one of the 2 additions in the Financial sector . There are now 57 Dividend Aristocrats. See also an overview of all changes since 2009

 

 

People’s United Financial, Inc. (PBCT) has reached the necessary 25 years of consecutive dividends and is a member of the S&P500.. This article will provide more detailed information on People’s United Financial, Inc. (PBCT) business model, peers, dividends, growth potential, recession performance  and valuation.

 

Business overview

People’s United Financial, Inc. is a savings and loan holding company and was founded in 1842 in Bridgeport, Connecticut. People’s provides commercial, retail, and business banking, and wealth management services to individual, corporate, and municipal customers. People’s annual revenue is $1.8 billion, has $48 billion in total assets, and a market capitalization today of $6.2 billion.

Dividend aristocrats peers

Next to People’s United, the following dividend aristocrats are also active in the same sector:

  • S&P Global Inc (formerly McGraw Hill Financial)
  • Aflac
  • Franklin Resources
  • T. Rowe Price
  • Cincinnati Financial
  • Chubb Limited
Dividend

The dividend growth and payout ratio are steady and in the “save” range around 50%.

Dividend Summary
Dividend (fwd) Annual Payout (FWD) Payout Ratio 5 Year Growth Rate Dividend Growth
4.19% $0.70 49.42% 1.50% 25 Years

Last Announced Dividend

Amount Declare Date EX-Dividend Date Record Date Payout Date Dividend Frequency
$0.175 01/17/2019 01/31/2019 02/01/2019 02/15/2019 Quarterly

People’s United Financial Inc Dividend Payment History


Recession performance
We analyzed each Dividend Aristocrat by looking at their earnings, dividends, maximum draw down (MDD) and stock price performance during the 2007-2009 financial crisis.

People’s United Financial earnings-per-share during the Great Recession are below:

  • 2007 earnings-per-share of $0.52
  • 2008 earnings-per-share of $0.42 (19% decline)
  • 2009 earnings-per-share of $0.30 (29% decline)
  • 2010 earnings-per-share of $0.24 (20% decline)

Not surprisingly, since People’s is active in the Financial sector, the recession period 2007-2010 has been difficult, but a little bit better than the large financial institutes.

The share price of People’s declined from $21.80 to $14.58  during the 2007-2009 financial crisis. The drop of -33.12% is a “average” performance during recession among the dividend aristocrats.  See the stock price chart below:

PBCT Recession Performance 2007-2009

People’s United Financial, Inc. (PBCT) Dividends 2007-2010

Dividend Aristocrat People’s United Financial has been able to increase dividends for 25 consecutive years, include the 2007-2010 period.


Valuation summary

Dividend aristocrat People’s has a price-to-earnings ratio of 11.80 (fwd) based on an estimate of $1.42 of earnings-per-share (EPS) for 2019 (FY).  In 2018 the EPS is estimated at $1.29. This is lower than our fair value estimate of 13 times earnings, and also significat below the average of 21.0 The 10-year historical valuation price-to-earnings ratio and dividend yield for People’s stock can be seen in the diagram below:

PBCT valuation

Based on the current valuation, which are below the 10 year averages and the earnings-per-share growth at 5% annually, the People’s stock is on an attractive share price level. Especially with the high yield and positive dividend growth every year.

 

To summarize:

People’s established a solid business model and the threshold of 25 years of consecutive dividends and also an above average and attractive dividend yield as well. People’s current yield is around 4.2%. At the current levels we are positive on this stock. The average analyst 1 year price target is $17.55, so 5% up. Combined with the dividend yield, the 2019 expected total return could be +10%

 

Other Sources of Dividend Investment Ideas

The Dividend Aristocrats list is not the only way to quickly screen for businesses that regularly pay rising dividends.

  • The Dividend Kings List is even more exclusive than the Dividend Aristocrats.  It is comprised of less than 20 businesses with 50+ years of consecutive dividend increases.
  • The MoneyInvestExpert Defensive Aristocrats is a performance-based top-10 selection of the Dividend Aristocrats to outperform the market on the long-term.
  • Portfolio lists like the Berkshire Hathaway Portfolio or Bill Gates’stock portfolio can be a source.
  • For the European focused investors there is also the list of European Dividend Aristocrats.
  • Dividend Champions are not necessarily members of the S&P 500 index, have increased their dividend for 25 or more consecutive years.
  • 100+ years of dividend, the list of stocks that pay over 100 year of dividend can be an list of inspiration.

Next to selecting the right dividend stocks, important principles for successful long-term investing are Disciple, Diversification, Defensive & indeed Dividend. Read more about this in our free e-book.

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