We Wouldn't Be Too Quick To Buy ProAssurance Corporation (NYSE:PRA) Before It Goes Ex-Dividend

By
Simply Wall St
Published
March 19, 2021
NYSE:PRA
Source: Shutterstock

It looks like ProAssurance Corporation (NYSE:PRA) is about to go ex-dividend in the next four days. You can purchase shares before the 25th of March in order to receive the dividend, which the company will pay on the 13th of April.

ProAssurance's next dividend payment will be US$0.05 per share. Last year, in total, the company distributed US$0.20 to shareholders. Based on the last year's worth of payments, ProAssurance stock has a trailing yield of around 0.7% on the current share price of $27.46. If you buy this business for its dividend, you should have an idea of whether ProAssurance's dividend is reliable and sustainable. So we need to investigate whether ProAssurance can afford its dividend, and if the dividend could grow.

View our latest analysis for ProAssurance

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. ProAssurance paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
NYSE:PRA Historic Dividend March 20th 2021

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. ProAssurance reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. ProAssurance has seen its dividend decline 8.8% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Remember, you can always get a snapshot of ProAssurance's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

Is ProAssurance an attractive dividend stock, or better left on the shelf? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Worse, the general trend in its earnings looks negative in recent years. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

With that in mind though, if the poor dividend characteristics of ProAssurance don't faze you, it's worth being mindful of the risks involved with this business. Our analysis shows 1 warning sign for ProAssurance and you should be aware of this before buying any shares.

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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