Top Picks 2017: Prudential Financial

01/24/2017 6:00 am EST


Chloe Jensen

Chief Analyst, Cabot Dividend Investor

My Top Pick for 2017 for more conservative investors is the second-largest life insurer in the U.S notes income specialist Chloe Lutts Jensen, editor of Cabot Dividend Investor.

Prudential Financial (PRU) is also a major provider of asset management and retirement services. It focuses is on fixed income, a major liability during the past eight years of ultra-low interest rates.

Rates stayed stubbornly low for most of 2016, causing Prudential to miss earnings estimates for four consecutive quarters.

Management responded with steps that have reduced the volatility of earnings and improved the transparency of their business.

But probably more importantly, rates are finally beginning to rise. Prudential’s earnings expectations are rising with them. 

I expect this to fuel further stock price appreciation in 2017, as well as steady dividend growth.

Over the past five years, PRU’s annual dividend increases have averaged 14%. The stock currently offers a yield of 2.6%.

Despite this impressive growth, PRU’s payout ratio has decreased in each of the last three years, and now stands at a very reasonable 26%.

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