Primerica's (NYSE:PRI) Shareholders Will Receive A Bigger Dividend Than Last Year

Primerica, Inc. (NYSE:PRI) will increase its dividend from last year's comparable payment on the 12th of June to $0.65. Even though the dividend went up, the yield is still quite low at only 1.5%.

Check out our latest analysis for Primerica

Primerica's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Primerica was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 91.7%. 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

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.20 in 2013, and the most recent fiscal year payment was $2.60. This implies that the company grew its distributions at a yearly rate of about 29% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Primerica Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Primerica has impressed us by growing EPS at 5.5% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Primerica's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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 of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 2 warning signs 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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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.