Safety Insurance Group (NASDAQ:SAFT) Has Affirmed Its Dividend Of $0.90

Safety Insurance Group, Inc.'s (NASDAQ:SAFT) investors are due to receive a payment of $0.90 per share on 15th of September. This means the annual payment is 5.1% of the current stock price, which is above the average for the industry.

View our latest analysis for Safety Insurance Group

Safety Insurance Group Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Looking forward, EPS could fall by 11.1% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 178%, which is definitely a bit high to be sustainable going forward.

Safety Insurance Group Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $2.40 in 2013, and the most recent fiscal year payment was $3.60. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Safety Insurance Group's EPS has declined at around 11% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For example, we've identified 3 warning signs for Safety Insurance Group (2 are significant!) that you should be aware of before investing. Is Safety Insurance Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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