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There is a lot to be liked about Old Republic International Corporation (NYSE:ORI) as an income stock. It has paid dividends over the past 10 years. The company currently pays out a dividend yield of 3.8% to shareholders, making it a relatively attractive dividend stock. Let’s dig deeper into whether Old Republic International should have a place in your portfolio.
5 checks you should use to assess a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share amount increased over the past?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
How well does Old Republic International fit our criteria?
The company currently pays out 62% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 40% which, assuming the share price stays the same, leads to a dividend yield of around 3.8%. However, EPS should increase to $1.85, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
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. ORI has increased its DPS from $0.68 to $0.78 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes ORI a true dividend rockstar.
Relative to peers, Old Republic International generates a yield of 3.8%, which is high for Insurance stocks.
With this in mind, I definitely rank Old Republic International as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their 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. Below, I’ve compiled three pertinent aspects you should further examine:
- 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 better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.