Erie Indemnity's (NASDAQ:ERIE) Dividend Will Be Increased To $1.19

Erie Indemnity Company (NASDAQ:ERIE) will increase its dividend from last year's comparable payment on the 20th of July to $1.19. Based on this payment, the dividend yield for the company will be 2.3%, which is fairly typical for the industry.

See our latest analysis for Erie Indemnity

Erie Indemnity's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend made up a very large portion of earnings and also represented 78% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

The next year is set to see EPS grow by 16.8%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 71% which would be quite comfortable going to take the dividend forward.

Erie Indemnity Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $2.21 in 2013, and the most recent fiscal year payment was $4.76. This implies that the company grew its distributions at a yearly rate of about 8.0% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

We Could See Erie Indemnity's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Erie Indemnity has grown earnings per share at 8.0% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Erie Indemnity stock. Is Erie Indemnity 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.