Should Income Investors Buy EMC Insurance Group Inc (NASDAQ:EMCI) Before Its Ex-Dividend?

Attention dividend hunters! EMC Insurance Group Inc (NASDAQ:EMCI) will be distributing its dividend of US$0.22 per share on the 11 September 2018, and will start trading ex-dividend in 2 days time on the 31 August 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into EMC Insurance Group’s latest financial data to analyse its dividend attributes.

View our latest analysis for EMC Insurance Group

5 checks you should use to assess a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

  • Is its annual yield among the top 25% of dividend-paying companies?
  • Does it consistently pay out dividends without missing a payment of significantly cutting payout?
  • Has the amount of dividend per share grown over the past?
  • Can it afford to pay the current rate of dividends from its earnings?
  • Will it be able to continue to payout at the current rate in the future?
NasdaqGS:EMCI Historical Dividend Yield August 28th 18
NasdaqGS:EMCI Historical Dividend Yield August 28th 18

How does EMC Insurance Group fare?

The company currently pays out 85.4% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. However, going forward, analysts expect EMCI’s payout to fall to 70.4% of its earnings, which leads to a dividend yield of around 3.6%. Furthermore, EPS is also forecasted to fall to $1.0 in the upcoming year. The lower EPS on top of a lower payout ratio will lead to a fall in dividend payment moving forward.

If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. In the case of EMCI it has increased its DPS from $0.48 to $0.88 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.

Relative to peers, EMC Insurance Group has a yield of 3.4%, which is high for Insurance stocks but still below the market’s top dividend payers.

Next Steps:

Keeping in mind the dividend characteristics above, EMC Insurance Group is definitely worth considering for investors looking to build a dedicated income portfolio. Given that 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 essential factors you should further research:

  1. 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.
  2. 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.
  3. Other Dividend Rockstars: Are there better dividend payers with stronger 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 editorial-team@simplywallst.com.