Employers Holdings (NYSE:EIG) Will Pay A Dividend Of US$0.25

Employers Holdings, Inc. (NYSE:EIG) has announced that it will pay a dividend of US$0.25 per share on the 15th of March. This means the dividend yield will be fairly typical at 2.5%.

Check out our latest analysis for Employers Holdings

Employers Holdings' Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Employers Holdings' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

If the trend of the last few years continues, EPS will grow by 5.5% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

Employers Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from US$0.24 in 2012 to the most recent annual payment of US$1.00. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Employers Holdings Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Employers Holdings has impressed us by growing EPS at 5.5% per year over the past five years. Employers Holdings definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Employers Holdings' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Employers Holdings' payments, as there could be some issues with sustaining them into the future. While Employers Holdings is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Employers Holdings that investors should know about before committing capital to this stock. Is Employers Holdings 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.