Primerica (NYSE:PRI) Is Increasing Its Dividend To $1.04

Primerica, Inc. (NYSE:PRI) will increase its dividend from last year's comparable payment on the 14th of March to $1.04. This takes the annual payment to 1.5% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Primerica

Primerica's Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Primerica's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 19.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 16%, which is in the range that makes us comfortable with the sustainability of the dividend.

Primerica Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.48 in 2015, and the most recent fiscal year payment was $4.16. This implies that the company grew its distributions at a yearly rate of about 24% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Primerica has been growing its earnings per share at 20% a 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.

We Really Like Primerica's Dividend

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. 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 Primerica that investors should know about before committing capital to this stock. Is Primerica not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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