Please ensure Javascript is enabled for purposes of website accessibility

Prudential: A FTSE 100 Dividend-Raising Star

By Kevin Godbold - Updated Apr 7, 2017 at 12:31PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Can Prudential's dividend continue to beat the wider market?

LONDON -- In an outcome that's tough on investors, the FTSE 100 (UKX) has failed to deliver a rising dividend payout over the last few years.

Just look at the iShares FTSE 100 ETF, for example. This is an exchange-traded fund that tracks the benchmark index, and we can see the aggregate payment from Britain's top 100 companies has yet to regain its pre-recession peak:







Dividend per share






But some companies within London's premier index have performed well on dividends, despite these austere times, and this series aims to seek them out. One such name is Prudential (LSE: PRU.L) (NYSE: PUK).

The big question is, can the company's dividend continue to outperform its index? Let's put the firm under scrutiny and test its financial mettle.

Prudential describes itself as an international financial services group, but most people will probably know it as an insurance outfit. With the shares at 833 pence, the market cap is 21,285 million pounds. This table summarizes the firm's recent financial record:







Revenue (millions of pounds)






Net cash from operations (millions of pounds)






Diluted earnings per share






Dividend per share






So, the dividend has increased by 40% during the last five years -- equivalent to an 8.8% compound annual growth rate.

Prudential derives by far the majority of its profits from insurance operations. Of the company's total profits, around 41% come from the U.K., 30% from Asia, and 29% from the U.S..

The source of these generally cash-backed profits is more than 26 million customers and 363 billion pounds of assets under management. It carries out operations under four main business units: Prudential Corporation Asia, Jackson National Life Insurance Company, Prudential U.K., and M&G.

Judging by the firm's record of trading, cash flow and profits suffered in the recent financial crisis, but both have made a full recovery since. Laudably, the progressive dividend policy remained unscathed throughout the period. If investors can stomach the esoteric financial reporting, and the cyclical nature of the business, Prudential could be a good dividend bet going forward. The directors see most opportunity for future growth in South East Asia. If that growth generates free cash, it can only be good news for the dividend.

Prudential's dividend growth score
I analyze four different features of a company to judge whether its dividend can continue to rise:

  1. Dividend cover: The recent dividend was covered more than twice by earnings: 4/5
  2. Net cash or debt: Net gearing appears to be comfortably below 50%: 4/5
  3. Cash flow: Cash flow supports profits but both can be lumpy: 4/5
  4. Outlook and recent trading: Good recent trading with a cautiously positive outlook: 4/5

Overall, I score Prudential 16 out of 20, which encourages me to believe the firm's dividend can continue to out-pace dividends from the FTSE 100.

Foolish summary
Although the business is prone to cyclical stresses, Prudential seems to be firing well on all four of my test-criteria cylinders.

Right now, the forecast full-year dividend is around 28.7 pence per share for 2013, which supports a possible income of about 3.4%. That's not bad, but the company can stay on my watchlist for the present.

Prudential is one of several dividend outperformers on the London stock exchange. There's one man who's as keen as I am to find and invest in them. I suggest you read all about his best investment ideas now in this free, time-limited report, while you have the chance: "8 Income Plays Held by Britain's Super Investor." This free report analyses the 20 billion-pound portfolio of legendary high-yield expert Neil Woodford. Click here now to discover his favorite dividend opportunities with good growth potential.

If you are an ambitious investor hoping to profit from this uncertain economy, as I am, I urge you to read "10 Steps to Making a Million in the Market" today -- it could transform your wealth. Click here now to request your free, no-obligation copy. The Motley Fool is helping Britain invest. Better.

Further investment opportunities:

Kevin does not own any shares mentioned in this article.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Prudential plc Stock Quote
Prudential plc
$25.07 (-2.87%) $0.74

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.