Safety Insurance Group (NASDAQ:SAFT) Is Paying Out 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 December. This means the annual payment is 4.6% of the current stock price, which is above the average for the industry.

See 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. Prior to this announcement, the company was paying out 170% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

If the company can't turn things around, EPS could fall by 16.0% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 214%, which is definitely a bit high to be sustainable going forward.

Safety Insurance Group Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from $2.40 total annually to $3.60. This means that it has been growing its distributions at 4.1% per annum over that time. 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

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Safety Insurance Group's EPS has fallen by approximately 16% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Safety Insurance Group's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. 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. However, there are other things to consider for investors when analysing stock performance. To that end, Safety Insurance Group has 3 warning signs (and 2 which are significant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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