Zurich Insurance Group (VTX:ZURN) Has Announced That It Will Be Increasing Its Dividend To $28.00

Zurich Insurance Group AG (VTX:ZURN) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of April to $28.00. This makes the dividend yield about the same as the industry average at 4.2%.

Check out our latest analysis for Zurich Insurance Group

Zurich Insurance Group's Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Zurich Insurance Group's dividend made up quite a large proportion of earnings but only 56% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

The next year is set to see EPS grow by 28.5%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 56% which brings it into quite a comfortable range.

Zurich Insurance Group Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was $16.88, compared to the most recent full-year payment of $28.28. This works out to be a compound annual growth rate (CAGR) of approximately 5.3% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Zurich Insurance Group has grown earnings per share at 7.8% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Our Thoughts On Zurich Insurance Group's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 12 Zurich Insurance Group analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Zurich Insurance Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.