Cincinnati Financial Corporation (NASDAQ:CINF) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy Cincinnati Financial Corporation (NASDAQ:CINF) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 16th of March to receive the dividend, which will be paid on the 15th of April.

Cincinnati Financial's next dividend payment will be US$0.63 per share, on the back of last year when the company paid a total of US$2.52 to shareholders. Based on the last year's worth of payments, Cincinnati Financial stock has a trailing yield of around 2.4% on the current share price of $106.25. If you buy this business for its dividend, you should have an idea of whether Cincinnati Financial's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Cincinnati Financial

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Cincinnati Financial paying out a modest 32% of its earnings.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Cincinnati Financial's earnings per share have been growing at 14% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Cincinnati Financial has delivered 4.8% dividend growth per year on average over the past 10 years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

Is Cincinnati Financial worth buying for its dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, Cincinnati Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

On that note, you'll want to research what risks Cincinnati Financial is facing. For example, Cincinnati Financial has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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