Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Safety Insurance Group, Inc. (NASDAQ:SAFT) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 28th of February in order to be eligible for this dividend, which will be paid on the 16th of March.
Safety Insurance Group’s next dividend payment will be US$0.90 per share. Last year, in total, the company distributed US$3.60 to shareholders. Last year’s total dividend payments show that Safety Insurance Group has a trailing yield of 3.8% on the current share price of $93.65. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it’s growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Safety Insurance Group paid out more than half (56%) of its earnings last year, which is a regular payout ratio for most companies.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it’s a relief to see Safety Insurance Group earnings per share are up 8.1% per annum over the last five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Safety Insurance Group has delivered an average of 8.4% per year annual increase in its dividend, based on the past ten years of dividend payments. It’s encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Is Safety Insurance Group an attractive dividend stock, or better left on the shelf? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we’re on the fence about its dividend prospects.
Want to learn more about Safety Insurance Group’s dividend performance? Check out this visualisation of its historical revenue and earnings growth.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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