Safety Insurance Group (NASDAQ:SAFT) Is Due To Pay A 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 June. Based on this payment, the dividend yield on the company's stock will be 5.0%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Safety Insurance Group

Safety Insurance Group Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

If the company can't turn things around, EPS could fall by 14.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 250%, which could put the dividend in jeopardy if the company's earnings don't improve.

Safety Insurance Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was $2.40, compared to the most recent full-year payment of $3.60. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Earnings per share has been sinking by 15% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Safety Insurance Group's payments, as there could be some issues with sustaining them into the future. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Safety Insurance Group you should be aware of, and 1 of them makes us a bit uncomfortable. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.