It looks like Selective Insurance Group, Inc. (NASDAQ:SIGI) is about to go ex-dividend in the next three days. This means that investors who purchase shares on or after the 11th of February will not receive the dividend, which will be paid on the 1st of March.
Selective Insurance Group's next dividend payment will be US$0.25 per share, and in the last 12 months, the company paid a total of US$1.00 per share. Looking at the last 12 months of distributions, Selective Insurance Group has a trailing yield of approximately 1.5% on its current stock price of $64.72. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Selective Insurance Group has a low and conservative payout ratio of just 23% of its income after tax.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Selective Insurance Group, with earnings per share up 7.1% on average over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Selective Insurance Group has lifted its dividend by approximately 6.8% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
From a dividend perspective, should investors buy or avoid Selective Insurance Group? Selective Insurance Group has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, Selective Insurance Group looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
On that note, you'll want to research what risks Selective Insurance Group is facing. Our analysis shows 1 warning sign for Selective Insurance Group and you should be aware of this before buying any shares.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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What are the risks and opportunities for Selective Insurance Group?
Trading at 21.7% below our estimate of its fair value
Earnings are forecast to grow 32.65% per year
Significant insider selling over the past 3 months
Profit margins (6.6%) are lower than last year (12.8%)
This article by Simply Wall St is general in nature. 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.
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