U.S. Bancorp raises dividend to $0.50

U.S. Bancorp has announced a dividend increase of $0.50, corresponding to a dividend yield of 4.4%. This news is likely to be well-received by shareholders. While a high dividend yield is pleasing, its sustainability is equally important. U.S. Bancorp has a history of at least ten years of dividend distributions. However, this alone does not guarantee future payments. The current payout ratio of 62% indicates that earnings sufficiently cover the dividends. An increase in earnings per share of 49.1% is projected over the next three years. According to analyses, the future payout ratio is estimated at 47%, which can be considered sustainable. The stability of past dividends strengthens confidence in future payment capacity. Since 2014, annual dividends have risen from $0.92 to the current $1.96. This corresponds to an average annual growth rate of approximately 7.9%—an attractive feature for long-term investors. Despite this positive development, there has been a decline in earnings per share of around 5.9% per year over the past five years. Should this trend continue, U.S. Bancorp could be forced to cut or suspend dividends. Positively, however, a recovery in earnings is predicted for the next twelve months, although this first needs to confirm a longer-term trend reversal. In summary, the dividend increase is a positive signal. Although the payout ratio is currently justifiable, future developments should be closely monitored. Stable dividend policies generally attract more investors, but earnings are also crucial. Without growth in earnings per share, a dividend will come under pressure in the long run.