Interested In Donegal Group's (NASDAQ:DGIC.A) Upcoming US$0.17 Dividend? You Have Four Days Left

It looks like Donegal Group Inc. (NASDAQ:DGIC.A) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Donegal Group's shares before the 31st of July in order to be eligible for the dividend, which will be paid on the 15th of August.

The company's next dividend payment will be US$0.17 per share. Last year, in total, the company distributed US$0.68 to shareholders. Calculating the last year's worth of payments shows that Donegal Group has a trailing yield of 4.5% on the current share price of $14.96. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Donegal Group can afford its dividend, and if the dividend could grow.

View our latest analysis for Donegal Group

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Donegal Group reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term.

Click here to see how much of its profit Donegal Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Donegal Group was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Donegal Group has delivered an average of 3.3% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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.

Get our latest analysis on Donegal Group's balance sheet health here.

To Sum It Up

Has Donegal Group got what it takes to maintain its dividend payments? We're uncomfortable with the fact that Donegal Group paid a dividend while being loss-making. It doesn't appear an outstanding opportunity, but could be worth a closer look.

With that being said, if dividends aren't your biggest concern with Donegal Group, you should know about the other risks facing this business. Case in point: We've spotted 2 warning signs for Donegal Group you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.