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

The board of Safety Insurance Group, Inc. (NASDAQ:SAFT) has announced that it will pay a dividend on the 15th of June, with investors receiving US$0.90 per share. The dividend yield will be 4.1% based on this payment which is still above the industry average.

Check out our latest analysis for Safety Insurance Group

Safety Insurance Group's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Safety Insurance Group's earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 10.5% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 49% by next year, which is in a pretty sustainable range.

Safety Insurance Group Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was US$2.00 in 2012, and the most recent fiscal year payment was US$3.60. This works out to be a compound annual growth rate (CAGR) of approximately 6.1% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Safety Insurance Group has seen EPS rising for the last five years, at 10% per annum. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Safety Insurance Group Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. 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.

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. Taking the debate a bit further, we've identified 2 warning signs for Safety Insurance Group that investors need to be conscious of moving forward. 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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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.