Essent Group (NYSE:ESNT) Is Increasing Its Dividend To $0.25

Essent Group Ltd. (NYSE:ESNT) has announced that it will be increasing its dividend from last year's comparable payment on the 20th of March to $0.25. Even though the dividend went up, the yield is still quite low at only 2.4%.

See our latest analysis for Essent Group

Essent Group's Dividend Forecasted To Be Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive.

Having paid out dividends for only 3 years, Essent Group does not have much of a history being a dividend paying company. Despite the company's shorter dividend history however, calculating for its payout ratio of 11% shows that Essent Group is able to comfortably pay dividends.

Looking forward, earnings per share is forecast to fall by 21.7% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 15% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Essent Group Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The dividend has gone from an annual total of $0.60 in 2020 to the most recent total annual payment of $1.00. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Essent Group has impressed us by growing EPS at 14% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Essent Group Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Essent Group you should be aware of, and 1 of them can't be ignored. 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.