Should You Buy Chubb Limited (NYSE:CB) For Its Dividend?

Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Over the past 10 years, Chubb Limited (NYSE:CB) has returned an average of 2.00% per year to shareholders in terms of dividend yield. Let's dig deeper into whether Chubb should have a place in your portfolio. See our latest analysis for Chubb

5 checks you should use to assess a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• Is its annual yield among the top 25% of dividend-paying companies?
• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
• Has it increased its dividend per share amount over the past?
• Is it able to pay the current rate of dividends from its earnings?
• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

Does Chubb pass our checks?

Chubb has a trailing twelve-month payout ratio of 34.12%, which means that the dividend is covered by earnings. However, going forward, analysts expect CB's payout to fall to 25.43% of its earnings, which leads to a dividend yield of 2.26%. However, EPS should increase to $10.41, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you're eyeing out is reliable in its payments. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time. Compared to its peers, Chubb generates a yield of 2.11%, which is on the low-side for Insurance stocks.

Next Steps:

Keeping in mind the dividend characteristics above, Chubb is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company's fundamentals and underlying business before making an investment decision. I've put together three important factors you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for CB’s future growth? Take a look at our free research report of analyst consensus for CB’s outlook.
2. Valuation: What is CB worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CB is currently mispriced by the market.
3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.