Readers hoping to buy The Progressive Corporation (NYSE:PGR) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 6th of April, you won't be eligible to receive this dividend, when it is paid on the 15th of April.
Progressive's next dividend payment will be US$0.10 per share, and in the last 12 months, the company paid a total of US$4.90 per share. Last year's total dividend payments show that Progressive has a trailing yield of 5.1% on the current share price of $95.61. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Progressive paid out 50% of its earnings to investors last year, a normal payout level for most businesses.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Progressive has grown its earnings rapidly, up 35% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Progressive has delivered 29% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
Is Progressive an attractive dividend stock, or better left on the shelf? Earnings per share are growing at an attractive rate, and Progressive is paying out a bit over half its profits. Overall, Progressive looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
In light of that, while Progressive has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 3 warning signs for Progressive (of which 1 makes us a bit uncomfortable!) you should know about.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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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. 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.
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