Primerica (NYSE:PRI) Has Announced That It Will Be Increasing Its Dividend To $0.75

Primerica, Inc. (NYSE:PRI) will increase its dividend on the 12th of March to $0.75, which is 15% higher than last year's payment from the same period of $0.65. This takes the annual payment to 1.1% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Primerica

Primerica's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Primerica's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 63.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 14% by next year, which is in a pretty sustainable range.

Primerica Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.44 in 2014 to the most recent total annual payment of $2.60. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Primerica has seen EPS rising for the last five years, at 8.1% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Primerica's prospects of growing its dividend payments in the future.

Primerica Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Primerica is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend 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 instance, we've picked out 2 warning signs for Primerica that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.