QBE Insurance Group's (ASX:QBE) Shareholders Will Receive A Bigger Dividend Than Last Year

QBE Insurance Group Limited (ASX:QBE) has announced that it will be increasing its dividend from last year's comparable payment on the 22nd of September to $0.14. The payment will take the dividend yield to 2.5%, which is in line with the average for the industry.

See our latest analysis for QBE Insurance Group

QBE Insurance Group's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, QBE Insurance Group was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 47.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the dividend has gone from $0.662 total annually to $0.252. This works out to be a decline of approximately 9.2% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. QBE Insurance Group has impressed us by growing EPS at 26% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that QBE Insurance Group could prove to be a strong dividend payer.

QBE Insurance Group Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 13 analysts we track are forecasting for QBE Insurance Group for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.