Over the past 10 years EMC Insurance Group Inc (NASDAQ:EMCI) has grown its dividend payouts from $0.48 to $0.88. With a market cap of US$503m, EMC Insurance Group pays out 85% of its earnings, leading to a 3.7% yield. Let me elaborate on you why the stock stands out for income investors like myself.
What Is A Dividend Rock Star?
It is a stock that pays a stable and consistent dividend, having done so reliably for the past decade with the expectation of this continuing into the future. More specifically:
- Its annual yield is among the top 25% of dividend payers
- It consistently pays out dividend without missing a payment or significantly cutting payout
- Its dividend per share amount has increased over the past
- It is able to pay the current rate of dividends from its earnings
- It is able to continue to payout at the current rate in the future
High Yield And Dependable
EMC Insurance Group’s dividend yield stands at 3.7%, which is high for Insurance stocks. But the real reason EMC Insurance Group stands out is because it has a high chance of being able to continue to pay dividend at this level for years to come, something that is quite desirable if you are looking to create a portfolio that generates a steady stream of income.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of EMCI it has increased its DPS from $0.48 to $0.88 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
EMC Insurance Group has a trailing twelve-month payout ratio of 85%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 74%, leading to a dividend yield of around 3.9%. Moreover, EPS is also forecasted to fall to $0.99 in the upcoming year. The lower EPS on top of a lower payout ratio will lead to a fall in dividend payment moving forward.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
EMC Insurance Group ticks all the boxes for what I look for in a dividend stock. If you are looking to build an income focused portfolio, this could be one to include. However, given this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three relevant aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for EMCI’s future growth? Take a look at our free research report of analyst consensus for EMCI’s outlook.
- Valuation: What is EMCI worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether EMCI is currently mispriced by the market.
- Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.