Investors who want to cash in on The National Security Group, Inc.’s (NASDAQ:NSEC) upcoming dividend of US$0.05 per share have only 2 days left to buy the shares before its ex-dividend date, 01 February 2019, in time for dividends payable on the 28 February 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into National Security Group’s latest financial data to analyse its dividend attributes.
View our latest analysis for National Security Group
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5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has it increased its dividend per share amount over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How does National Security Group fare?
National Security Group has a trailing twelve-month payout ratio of 20%, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Dividend payments from National Security Group have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Relative to peers, National Security Group produces a yield of 1.6%, which is on the low-side for Insurance stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in National Security Group for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. 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. Below, I’ve compiled three essential factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for NSEC’s future growth? Take a look at our free research report of analyst consensus for NSEC’s outlook.
- Valuation: What is NSEC 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 NSEC is currently mispriced by the market.
- 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.