If you're looking for investment thrills, then keep looking. You won't find any with this stock. If you're looking for reliable, above-average dividend payments for the rest of your life, though, put Prudential Financial (PRU -0.61%) on your watchlist (if not in your portfolio) while the dividend yield is a healthy 4%. It's got staying power to spare.
Prudential Financial, by the numbers
You know the company. Prudential is, of course, a major life insurance outfit. It's also got a presence in the investment arena, offering retirement plans, portfolio management, annuities, and all the services that support these businesses. All told, Prudential Financial boasts a little over $1.7 trillion worth of invested assets under its umbrella, and the $45 billion outfit -- as measured by market cap -- is sitting on $3.6 billion worth of its own accessible liquidity.
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While it's not always profitable, profits are pretty much the norm for this financial name. The last time in the past decade the company's slipped into the red was the first half of 2020, when the COVID-19 pandemic was simply preventing new business from being done, but not negating new claims. It didn't remain in the red for very long, though.
PRU Normalized Diluted EPS (Quarterly) data by YCharts
In other words, the organization is built to last, and here to stay.
That's not the crux of the reason an income-minded investor is going to be interested in owning a "piece of the rock" though, so to speak. Far more important is the fact that not only has Prudential paid some sort of quarterly dividend every year since 2002, but it's also consistently raised its dividend payment every year since 2014, from $0.40 per share then to $1.20 per share beginning this year.
That's a compounded annual growth rate of nearly 15%, easily outpacing even our current brisk rate of inflation. It's also a cadence of payout growth that suggests the company is aiming to earn a Dividend Aristocrat status, meaning it's upped its annual payment every year for at least 25 consecutive years.
Even that, however, doesn't inherently make Prudential Financial a "forever" name. The long-term bullish argument here is rooted in something much deeper -- the nature of the insurance business itself.
Insurers always (eventually) win the numbers game
There are more consistently profitable companies out there. Utility stocks, for instance. Consumers typically do whatever it takes to keep the lights on and the water running, paying whatever it is those providers charge for their services. Indeed, it only took a couple quarters' worth of pandemic to remind the world that the insurance industry isn't infallible.
Except, it kind of is. The key is in how the mathematics of the insurance business is handled.
While the occasional annual loss would imply insurers don't really have a handle on how much revenue they need to cover their payout costs, nothing could be further from the truth. While it is true insurance outfits do slip into the red from time to time, specially trained mathematicians called actuaries are able to appropriately reprice future insurance premiums based on the latest covered-payout data.
Those price adjustments, of course, are almost always upward. This is how property insurers have survived what seem like increasingly devastating hurricane seasons; property insurance premiums in hurricane-ravaged areas have also soared in recent years. While Prudential Financial isn't in the ever-volatile property and casualty insurance business, that only makes the company's actuarial work more accurate from one year to the next.
Perhaps more than anything, however, Prudential provides a service that most individuals and institutions feel they have to pay for at any price.
Prudential is built to last
None of this is to suggest Prudential Financial can afford to get sloppy with how it sets premiums and manages its liabilities. It still has to price its products competitively, and it's still ultimately reliant on the stock and bond market to support its customers' pooled money from which payouts are drawn.
It's a business, however, where size and experience help a company remain competitive with other powerhouses in the business, and keep would-be competitors at bay.
As was noted, Prudential is never going to provide shareholders with a thrilling investor experience. It is going to provide shareholders with a reliable, firmly growing dividend though, year in and year out for about as far as anyone can see into the future.
