Selective Insurance Group, Inc. (NASDAQ:SIGI) stock is about to trade ex-dividend in 4 days time. Ex-dividend means that investors that purchase the stock on or after the 14th of August will not receive this dividend, which will be paid on the 3rd of September.
Selective Insurance Group’s upcoming dividend is US$0.20 a share, following on from the last 12 months, when the company distributed a total of US$0.80 per share to shareholders. Looking at the last 12 months of distributions, Selective Insurance Group has a trailing yield of approximately 1.0% on its current stock price of $80.28. If you buy this business for its dividend, you should have an idea of whether Selective Insurance Group’s dividend is reliable and sustainable. As a result, readers should always check whether Selective Insurance Group has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Selective Insurance Group paid out just 20% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Selective Insurance Group’s earnings per share have been growing at 16% a year for the past five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Selective Insurance Group has lifted its dividend by approximately 4.4% a year on average. It’s good to see both earnings and the dividend have improved – although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
From a dividend perspective, should investors buy or avoid Selective Insurance Group? When companies are growing rapidly and retaining a majority of the profits within the business, it’s usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, Selective Insurance Group looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Wondering what the future holds for Selective Insurance Group? See what the eight analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.