The board of The Allstate Corporation (NYSE:ALL) has announced that the dividend on 3rd of April will be increased to $0.89, which will be 4.7% higher than last year's payment of $0.85 which covered the same period. This will take the dividend yield to an attractive 2.6%, providing a nice boost to shareholder returns.
View our latest analysis for Allstate
Allstate's Dividend Is Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained. Even though Allstate isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.
According to analysts, EPS should be several times higher next year. If the dividend extends its recent trend, estimates say the dividend could reach 48%, which we would be comfortable to see continuing.
Allstate Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.88 in 2013, and the most recent fiscal year payment was $3.40. This means that it has been growing its distributions at 14% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend's Growth Prospects Are Limited
The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Although it's important to note that Allstate's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think Allstate's payments are rock solid. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Allstate that investors need to be conscious of moving forward. 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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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.
About NYSE:ALL
Allstate
Provides property and casualty, and other insurance products in the United States and Canada.
Established dividend payer and good value.
