CNA Financial (NYSE:CNA) Is Increasing Its Dividend To US$0.40

CNA Financial Corporation's ( NYSE:CNA ) dividend will be increasing to US$0.40 on 2nd of June. This is an increase compared to last year's US$0.38 payment from the same period. This will take the dividend yield to an attractive 7.7%, providing a nice boost to shareholder returns.

See our latest analysis for CNA Financial

CNA Financial'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. However, CNA Financial's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to fall by 5.7%. If recent patterns in the dividend continue, we could see the payout ratio reaching 92% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Dividend Volatility

The company's dividend history has been marked by stability, with only 1 cut (in a special dividend) in the last 10 years. Outside of the special dividend cut, regular dividend payment have been growing over time. The dividend has gone from US$0.40 in 2011 to the most recent annual payment of US$3.60. This means that it has been growing its distributions at 25% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been crawling upwards at 2.6% per year. While EPS growth is quite low, CNA Financial has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On CNA Financial's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for CNA Financial that investors need to be conscious of moving forward. Is CNA Financial 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.