Cincinnati Financial's (NASDAQ:CINF) Shareholders Will Receive A Bigger Dividend Than Last Year

Cincinnati Financial Corporation's (NASDAQ:CINF) periodic dividend will be increasing on the 15th of April to $0.87, with investors receiving 7.4% more than last year's $0.81. This will take the annual payment to 2.4% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Cincinnati Financial

Cincinnati Financial's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Cincinnati Financial was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 77.3% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could reach 79%, which is definitely on the higher side.

Cincinnati Financial Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $1.76 in 2015 to the most recent total annual payment of $3.24. This means that it has been growing its distributions at 6.3% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Cincinnati Financial has seen EPS rising for the last five years, at 28% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Cincinnati Financial 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 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Cincinnati Financial that you should be aware of before investing. Is Cincinnati Financial 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.