Progressive (NYSE:PGR) Is Paying Out A Dividend Of $0.10

The Progressive Corporation (NYSE:PGR) has announced that it will pay a dividend of $0.10 per share on the 11th of July. This payment means that the dividend yield will be 1.8%, which is around the industry average.

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Progressive's Projected Earnings Seem Likely To Cover Future Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Progressive was easily earning enough to 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 expand by 12.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Progressive

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was $0.686, compared to the most recent full-year payment of $4.90. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

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. Progressive has impressed us by growing EPS at 19% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Progressive 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 company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Progressive that investors should know about before committing capital to this stock. Is Progressive 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.