James River Group Holdings (NASDAQ:JRVR) Is Due To Pay A Dividend Of $0.05

James River Group Holdings, Ltd. (NASDAQ:JRVR) has announced that it will pay a dividend of $0.05 per share on the 28th of June. Based on this payment, the dividend yield on the company's stock will be 2.5%, which is an attractive boost to shareholder returns.

Check out our latest analysis for James River Group Holdings

James River Group Holdings' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, James River Group Holdings was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 32.1%. If the dividend continues on this path, the payout ratio could be 8.3% by next year, which we think can be pretty sustainable going forward.

James River Group Holdings' Dividend Has Lacked Consistency

It's comforting to see that James River Group Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of $0.64 in 2015 to the most recent total annual payment of $0.20. This works out to a decline of approximately 69% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Come By

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. It's not great to see that James River Group Holdings' earnings per share has fallen at approximately 5.8% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about James River Group Holdings' payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for James River Group Holdings that investors need to be conscious of moving forward. Is James River Group Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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