Safety Insurance Group (NASDAQ:SAFT) Will Pay A Dividend Of US$0.90

Safety Insurance Group, Inc. (NASDAQ:SAFT) has announced that it will pay a dividend of US$0.90 per share on the 15th of September. The dividend yield will be 4.5% based on this payment which is still above the industry average.

View our latest analysis for Safety Insurance Group

Safety Insurance Group's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Safety Insurance Group was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 25.3% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 first annual payment during the last 10 years was US$2.00 in 2011, and the most recent fiscal year payment was US$3.60. This implies that the company grew its distributions at a yearly rate of about 6.1% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Safety Insurance Group has impressed us by growing EPS at 25% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Safety Insurance Group Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. As an example, we've identified 1 warning sign for Safety Insurance Group that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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