Donegal Group Inc. (NASDAQ:DGIC.B) Passed Our Checks, And It's About To Pay A US$0.13 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Donegal Group Inc. (NASDAQ:DGIC.B) is about to go ex-dividend in just four days. If you purchase the stock on or after the 31st of July, you won't be eligible to receive this dividend, when it is paid on the 17th of August.

Donegal Group's next dividend payment will be US$0.13 per share, on the back of last year when the company paid a total of US$0.53 to shareholders. Looking at the last 12 months of distributions, Donegal Group has a trailing yield of approximately 4.7% on its current stock price of $11.25. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Donegal Group has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Donegal Group

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Donegal Group paid out more than half (52%) of its earnings last year, which is a regular payout ratio for most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Donegal Group's earnings per share have risen 12% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Donegal Group has delivered 2.9% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Donegal Group is keeping back more of its profits to grow the business.

Final Takeaway

From a dividend perspective, should investors buy or avoid Donegal Group? Earnings per share are growing nicely, and Donegal Group is paying out a percentage of its earnings that is around the average for dividend-paying stocks. In summary, Donegal Group appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

Curious what other investors think of Donegal Group? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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