We all know of Prudential Financial (PRU) and the use of the Rock of Gibraltar to symbolize the company’s steadfast support for customer financials. But there is a lot more to like about this diversified financial services firm, notes Tim Plaehn, editor of Monthly Dividend Multiplier.
Prudential offers a broad range of business and individual financial products and solutions. The company divides its operations into four main divisions:
- PGIM handles asset management with over $1 trillion in assets. This division provides asset and investment management services for mutual funds, institutional clients, sub-advisory clients, government entities, and Prudential’s own investment accounts.
- US Workplace Solutions provides institutional retirement plan management services. The division also provides group life and disability products for employers to offer their employees.
- US Individual Solutions develops, markets, and sells individual annuity and life insurance products. Annuities include both fixed and variable products. Life insurance products include variable life, term life, and universal life insurance policies.
- International Insurance offers life insurance, retirement products, and certain accident and health products. Primary market countries include Japan, Korea, Taiwan, Brazil, Argentina, Mexico, Chile, Malaysia, India, and Indonesia.
Prudential is a very profitable company. For 2022, the company reported operating income of $4.65 billion or $9.46 per share. The income numbers were down from the 2021 net income of $7.3 billion, or $14.58 in adjusted earnings per share. The reported 2020 income was $4.95 billion. The 2022 adjusted return on equity was 9.1%.
For the 2023 first quarter, Prudential reported an adjusted operating income of $1.266 billion, or $2.66 in adjusted earnings per share. The adjusted book value per share was $97.29. These results were down slightly from a year earlier, primarily due to a decline in assets under management.
After years of 10% per year dividend growth, Prudential increased the payout by 4.5%, 4.3%, and 4.2% sequentially for 2021 through 2023. These were five-cent increases to the quarterly rate. The current $5.00 annual rate gives a 33% payout ratio based on 2021 net income.
Meanwhile, here are the dividends paid since 2008:
Prudential is a long-term dividend growth stock, which should generate Monthly Dividend Multiplier target mid-teens compound annual total returns. The recent 5.1% yield gives us a good launch for those returns.
Recommended Action: Buy PRU.
