Over the past 10 years Old Republic International Corporation (NYSE:ORI) has grown its dividend payouts from $0.68 to $0.80. With a market cap of US$6.4b, Old Republic International pays out 62% of its earnings, leading to a 3.8% yield. Let me elaborate on you why the stock stands out for income investors like myself.
What Is A Dividend Rock Star?
It is a stock that pays a stable and consistent dividend, having done so reliably for the past decade with the expectation of this continuing into the future. More specifically:
- Its annual yield is among the top 25% of dividend payers
- It has paid dividend every year without dramatically reducing payout in the past
- Its dividend per share amount has increased over the past
- It can afford to pay the current rate of dividends from its earnings
- It is able to continue to payout at the current rate in the future
High Yield And Dependable
Old Republic International currently yields 3.8%, which is high for Insurance stocks. But the real reason Old Republic International stands out is because it has a proven track record of continuously paying out this level of dividends, from earnings, to shareholders and can be expected to continue paying in the future. This is a highly desirable trait for a stock holding if you’re investor who wants a robust cash inflow from your portfolio over a long period of time.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of ORI it has increased its DPS from $0.68 to $0.80 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes ORI a true dividend rockstar.
The current trailing twelve-month payout ratio for the stock is 62%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect ORI’s payout to fall to 40% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.7%. However, EPS should increase to $1.85, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
Old Republic International ticks all the boxes for what I look for in a dividend stock. If you are looking to build an income focused portfolio, this could be one to include. However, given this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three fundamental factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for ORI’s future growth? Take a look at our free research report of analyst consensus for ORI’s outlook.
- Valuation: What is ORI 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 ORI is currently mispriced by the market.
- Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.
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If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.