Mercury General Corporation (NYSE:MCY) will pay a dividend of US$0.64 on the 30th of March. This means the annual payment is 4.6% of the current stock price, which is above the average for the industry.
Check out our latest analysis for Mercury General
Mercury General'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. The last dividend was quite easily covered by Mercury General's earnings. This means that a large portion of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to fall by 24.1%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 75%, which is comfortable for the company to continue in the future.
Mercury General Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2012, the dividend has gone from US$2.40 to US$2.54. Its dividends have grown at less than 1% per annum over this time frame. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Mercury General has grown earnings per share at 28% per year over the past five years. Mercury General is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
Mercury General Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Mercury General (of which 1 is a bit unpleasant!) you should know about. 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:MCY
Mercury General
Engages in writing personal automobile insurance in the United States.
Fair value with acceptable track record.
