Insperity (NYSE:NSP) Is Increasing Its Dividend To $0.60

The board of Insperity, Inc. (NYSE:NSP) has announced that it will be increasing its dividend by 5.3% on the 21st of June to $0.60, up from last year's comparable payment of $0.57. This will take the annual payment to 2.3% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Insperity

Insperity's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Insperity 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.

Over the next year, EPS is forecast to fall by 20.4%. If recent patterns in the dividend continue, we could see the payout ratio reaching 84% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Insperity Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.34 in 2014, and the most recent fiscal year payment was $2.28. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Insperity May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately, Insperity's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. The company has been growing at a pretty soft 1.2% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Insperity 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. The earnings easily cover the company's distributions, and the company is generating plenty of cash. 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. All of these factors considered, we think this has solid potential as a dividend stock.

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. Just as an example, we've come across 2 warning signs for Insperity you should be aware of, and 1 of them is a bit concerning. Is Insperity 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.