Zurich Insurance Group (VTX:ZURN) Is Paying Out A Larger Dividend Than Last Year

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. Based on this payment, the dividend yield for the company will be 4.4%, which is fairly typical for the industry.

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Zurich Insurance Group's Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Zurich Insurance Group's dividend made up quite a large proportion of earnings but only 61% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 29.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 56%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

See our latest analysis for Zurich Insurance Group

Zurich Insurance Group Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $16.88 in 2015, and the most recent fiscal year payment was $31.01. This works out to be a compound annual growth rate (CAGR) of approximately 6.3% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Zurich Insurance Group Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. 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 is generating plenty of cash, but we still think the dividend is a bit high for comfort. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. 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. If you are a dividend investor, you might also want to look at our curated list of high yield 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.