Reinsurance Group of America's (NYSE:RGA) Dividend Will Be Increased To $0.85

Reinsurance Group of America, Incorporated (NYSE:RGA) will increase its dividend from last year's comparable payment on the 29th of August to $0.85. The payment will take the dividend yield to 2.4%, which is in line with the average for the industry.

View our latest analysis for Reinsurance Group of America

Reinsurance Group of America's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Reinsurance Group of America'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.

The next year is set to see EPS grow by 75.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 18% by next year, which is in a pretty sustainable range.

Reinsurance Group of America Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.96 in 2013, and the most recent fiscal year payment was $3.40. This means that it has been growing its distributions at 13% per annum 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.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Reinsurance Group of America's EPS has fallen by approximately 15% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Reinsurance Group of America's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 1 warning sign for Reinsurance Group of America that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.